From: jmorriso@ee.ubc.ca (John Paul Morrison)
Subject: The Morality of Capitalism
Organization: University of BC, Electrical Engineering
Date: Thu, 28 Jan 1993 07:30:14 GMT


another interesting perspective. don't mind me, I'm just trying
to gaurantee a minimum amount of CONTENT in this newsgroup.
Eventually I may provoke some serious examination of Canadian economics.


                Moral Criticisms of the Market

                        by Ken S. Ewert

     According to an author writing in a recent issue of The
Nation magazine, "The religious Left is the only Left we've
got."  An overstatement?  Perhaps.  However, it points to an
interesting fact, namely that while the opposition to free
markets and less government control has declined in recent
years among the "secular left," the political-economic views
of the "Christian left" seem to remain stubbornly unchanged.

     Why is this so?  Why are the secular critics of the
market mellowing while the Christian critics are not?

     Perhaps one major reason is the different criteria by
which these two ideological allies measure economic systems.
The secular left, after more than half a century of failed
experiments in anti-free market policies, has begrudgingly
softened its hostility towards the market for predominantly
pragmatic reasons.  Within their camp the attitude seems to be
that since it hasn't worked, let's get on with finding
something that will.  While this may be less than a heartfelt
conversion to a philosophy of economic freedom, at least (for
many) this recognition has meant taking a more sympathetic
view of free markets.

     However, within the Christian camp the leftist
intellectuals seem to be much less influenced by the
demonstrated failure of state-directed economic policies.
They remain unimpressed with arguments pointing out the
efficiency and productivity of the free market, or statistics
and examples showing the non-workability of traditional
interventionist economic policies.  Why?  One likely reason is
that the criteria by which these thinkers choose to measure
capitalism are fundamentally moral in nature, so much so that
socialism, despite its obvious shortcomings, is still
preferred because of its perceived moral superiority.  In
their eyes, the justness and morality of an economic system
are vastly more important than its efficiency.

     If indeed the Christian critics of the market are
insisting that an economic system must be ultimately judged by
moral standards, we should agree and applaud them for their
principled position.  They are asking a crucially important
question: is the free market a moral economic system?

     Unfortunately, these thinkers have answered the question
with a resounding "No!"  They have examined the free market
and found it morally wanting.  Some of the most common reasons
given for this indictment are that: the market is based on an
ethic of selfishness and it fosters materialism; it atomizes
and dehumanizes society by placing too much emphasis on the
individual; and it gives rise to tyrannical economic powers
which subsequently are used to oppress the weaker and more
defenseless members of society.

     If these accusations are correct, the market is justly
condemned.  But have these critics correctly judged the
morality of the free market?  Let's re-examine their
charges.

I. Selfishness

     The market, it is suggested, is based on and encourages
an ethic of selfishness.  According to critics of the market,
mere survival in this competitive economic system requires
that we each must "look after Number One."  Individuals are
encouraged to focus on the profit motive to the exclusion of
higher goals and as a result selfishness becomes almost a
virtue.  And this, it is noted, is in stark contrast with the
self-sacrificial love taught by the Scriptures.  Instead of
rewarding love, compassion, and kindness towards others, the
free market seems to reward self-orientation and self-
indulgence.  Instead of encouraging us to be concerned about
our neighbor, the free market seems to encourage us to be
concerned about ourselves.  Individuals who might otherwise be
benevolent, according to this view, are corrupted by the
demands of an economic system that forces them to put
themselves first.  In the thinking of these critics, the
market is the logical precursor to the "me generation."

     However, this charge is superficial and misleading in
several respects.  First, it is important to remember that
while the free market does allow "self-directed" economic
actions, it does not require "selfish" economic actions.
There is an important distinction here.  It should be obvious
that all human action is self-directed.  Each of us has been
created with a mind, allowing us to set priorities and goals,
and a will, which enables us to take steps to realize these
goals.  This is equally true for those who live in a market
economy, and those who live under a politically directed
economy.  The difference between the two systems is not
between self-directed action versus non-self-directed action,
but rather between a peaceful pursuit of goals (through
voluntary exchange in a free economy) versus a coercive
pursuit of goals (through wealth transferred via the state in
a "planned" economy).  In other words, the only question is
how will self-directed action manifest itself: will it take
place through mutually beneficial economic exchanges, or
through predatory political actions?

     Clearly the free market cannot be singled out and
condemned for allowing self-directed actions to take place,
since self-directed actions are an inescapable part of human
life.  But can it be condemned for giving rise to selfishness?
In other words, does the free market engender an attitude of
selfishness in individuals?  If we define selfishness as a
devotion to one's own advantage or welfare without regard for
the welfare of others, it is incontestable that selfishness
does exist in the free economy; many individuals act with only
themselves ultimately in mind.  And it is true, that according
to the clear teaching of Scripture, selfishness is wrong.

     But we must bear in mind that although selfishness does
exist in the free market, it also exists under other economic
systems.  Is the Soviet factory manager less selfish than the
American capitalist?  Is greed any less prevalent in the
politically directed system which operates via perpetual
bribes, theft from state enterprises, and political purges?
There is no reason to think so.  The reason for this is clear:
selfishness is not an environmentally induced condition, i.e.,
a moral disease caused by the economic system, but rather a
result of man's fallen nature.  It is out of the heart, as
Christ said, that a man is defiled.  Moral failure is not
spawned by the environment.

     It is clear that not all self-directed action is
necessarily selfish action.  For example, when I enter the
marketplace in order to earn wealth to feed, clothe, house,
and provide education or medical care for my children, I am
not acting selfishly.  Likewise, if you or I want to extend
charity to a needy neighbor or friend, we must first take
"self-directed" action to create the wealth necessary to do
so.  Such action is hardly selfish.

     The point is this: the free market allows individuals to
peacefully pursue their chosen goals and priorities, but it
doesn't dictate or determine those priorities.  It does not
force an individual to focus on his own needs and desires, but
leaves him or her at liberty to be self-centered or
benevolent.  My ultimate goal may be self-indulgence, or I may
make a high priority of looking after others -- the choice is
mine.  As to which I should do, the market is silent.  As an
economic system, the market simply does not speak in favor of
selfish or unselfish priorities.

     However, the free market, while not touching the heart of
a man or eliminating selfishness, does in fact restrain
selfishness.  It channels self-centered desires into actions
that are beneficial to others.  This is so because in order to
"get ahead" in the free economy, we must first please other
people by producing something which is of use and value to
them.  In other words, the market disciplines each of us to
look outwards and serve others.  Only by doing so can we
persuade them to give us what we want in exchange.

     We will return to this theme later, but for now the point
is that in a very practical sense, the workings of the market
persuade even the most self-indulgent among us to serve others
and to be concerned about the needs and wants of his neighbor.
True, the motivation for doing so is not necessarily pure or
unselfish, but as the Bible so clearly teaches, it is only God
who can change the hearts of men.

     Furthermore, the free market, because of the incredible
wealth it allows to be created, enables each of us to
practically live beyond ourselves.  In order to tangibly love
our neighbor (minister to his or her physical needs) we must
first have the wealth to do so.

     We sometimes need to be reminded that wealth is not the
natural state of affairs.  Throughout most of history the
majority of people lived under some sort of centrally
controlled economic system and were forced to devote the
mainstay of their energies to mere survival.  Often all but
the wealthiest individuals lacked the economic means to look
much beyond themselves and aid others who were in need.

     But the productivity spawned by economic freedom has
radically changed this.  In a free market, we are not only
able to choose unselfish values and priorities, but we are
also able to create the wealth necessary to practically
fulfill them.

II. Materialism

     Another moral indictment of the market, closely related
to the charge of selfishness, is the belief that the market
fosters materialism.  The example most often used to
demonstrate the market's guilt in this area is the perceived
evil effects of advertising.  It is contended that advertising
creates a sort of "lust" in the heart of a consumer by
persuading him or her that mere material possessions will
bring joy and fulfillment.  In this sense, the market is
condemned for creating a spirit of materialism and fostering
an ethic of acquisitiveness.  The market in general, and
advertising specifically, is a persistent temptress
encouraging each of us to concentrate on the lowest level of
life, mere material goods.

     This charge can be answered in much the same manner as
the charge of selfishness.  Just as allowing free exchange
doesn't require selfishness, neither does it require
materialism.  It is true that when people are economically
free, materialism is possible, and certainly there are
materialistic people in market economies.  But this hardly
warrants a condemnation of the market.  Materialism, like
selfishness, can and will occur under any economic system.  It
is obvious that a desire for material goods is far from being
unique to capitalism.  Witness, for example, the response of
shoppers as a store puts out a new rack of genuine cotton
shirts in Moscow, or a shipment of fresh meat arrives in a
Krakow shop.

     Although the role of advertising has been much maligned,
it in fact provides a vital service to consumers.  Advertising
conveys information.  It tells the consumer what products are
available, how these products can meet his or her needs, and
what important differences exist among competing products.
The fact that this is a valuable function becomes apparent if
you imagine trying to buy a used car in a world without
advertising.  Either your choice of cars would be severely
limited (to those cars you happen to stumble upon, i.e. gain
knowledge of) or you would have to pay more (in the form of
time and resources used in seeking out and comparing cars).
In either case, without the "free" knowledge provided by
advertising, you would be much worse off.

     But the economic role of advertising aside, does
advertising actually "create" a desire for goods?  If it does,
why do businesses in market-oriented economies spend billions
of dollars each year on consumer research, to find out what
customers want?  Why do some advertised products not sell (for
example, the Edsel), or cease to sell well (for example the
hoola hoop)?  In the market economy consumers are the ultimate
sovereigns of production.  Their wants and priorities dictate
what is produced; what is produced doesn't determine their
wants and priorities.  Many bankrupt businessmen, left with
unsalable (at a profitable price) products wistfully wish that
the reverse were true.

     Moreover, the Bible consistently rejects any attempt by
man to ascribe his sinful tendencies to his environment.  If I
am filled with avarice when I see an advertisement for a new
Mercedes, I cannot place the blame on the advertisement.
Rather I must recognize that I am responsible for my thoughts
and desires, and that the problem lies within myself.  After
all, I could feel equally acquisitive if I just saw the
Mercedes on the street rather than in an advertisement.  Is it
wrong for the owner of the Mercedes to incite my desires by
driving his car where I might see it?  Hardly.

     Just as God did not allow Adam to blame Satan (the
advertiser -- and a blatantly false advertiser at that) or the
fruit (the appealing material good) for his sin in the Garden,
we cannot lay the blame for materialism on the free market or
on advertising.  The materialist's problem is the sin within
his heart, not his environment.

     If we follow the environmental explanation of materialism
to its logical conclusion, the only solution would appear to
be doing away with all wealth (i.e. eliminate all possible
temptation).  If this were the appropriate solution to the
moral problem of materialism, perhaps the moral high ground
must be conceded to the state-run economies of the world after
all.  They have been overwhelmingly successful at destroying
wealth and wealth-creating capital!

III. Impersonalism and Individualism

     Another common criticism of the market economy is its
supposed tendency towards impersonalism and what some have
called "individualistic anarchy."  According to many Christian
critics, the market encourages self-centered behavior and
discourages relational ties in society.  The non-personal
market allocation of goods and services is seen to be
antithetical to the seemingly higher and more noble goal of a
loving and interdependent community.  Because of the economic
independence that the market affords, the individual is cut
off from meaningful relationships with his fellow human beings
and divorced from any larger purpose than his own interests.
In short, the free market is accused of breeding a pathetic
and inhumane isolationism.

     But does the market encourage impersonal behavior?
Certainly not.  It is important to understand that the
presence of economic freedom does not require that all
transactions and relationships take place on an impersonal
level.  For example, many people have good friendships with
their customers, suppliers, employees, or employers.  While
these relationships are economic, they are not merely economic
and they are not impersonal.

     Furthermore, while the market leaves us free to deal with
other people solely on the basis of economic motives, we are
not required nor even necessarily encouraged to do so.  We are
completely free to deal on a non-economic basis.  Suppose that
I am in the business of selling food, and I find that someone
is so poor that he or she has nothing to trade for the food
that I am offering for sale.  In the free market I am
completely free to act apart from economic motives and make a
charitable gift of the food.  I have in no way lost my ability
to act in a personal and non-economic way.

     So the market is not an inherently impersonal economic
system.  Nor is it hostile to the formation of community
relationships.

     An excellent example of a community which exists within
the market system is the family.  Obviously I deal with my
wife and children in a non-market manner.  I give them food,
shelter, clothing, etc., and I certainly don't expect any
economic gain in return.  I do so joyfully, because I love my
family and I value my relationship with them far above the
economic benefits I forgo.  Another example is the church.  I
have a non-economic and very personal relationship with people
in my church.  And there are countless teams, clubs,
organizations, and associations which I can join, if I choose.
If I want, I can even become part of a commune.  The market
economy doesn't stand in the way of, or discourage, any of
these expressions of community.

     But now we come to the heart of this objection against
the market: what if people will not voluntarily choose to
relate to each other in personal or community-type
relationships?  What if they choose not to look beyond their
own interests and work for some purpose larger than
themselves?  The answer to this is the rather obvious
question: who should decide what is the appropriate degree of
relationship and community?

     True community, I submit, is something which must be
consensual, meaning it must be voluntarily established.  Think
of a marriage or a church.  If people do not choose to enter
into these relationships when they are free to do so, we may
judge their action to be a mistake, but by what standard can
we try to coerce them into such relationships?  Even if there
were some objective standard of "optimum community," it is not
at all clear that we could create it by robbing people of
their economic freedom.  There is no reason to believe that
individuals living under a system of economic "planning" are
less isolated or have more community by virtue of their
system.  The fact that individuals are forced into a
collective group hardly means that a loving and caring
community will result.  Love and care are things which cannot
be coercively extracted, but must be freely given.

     Moreover, the free market actually encourages the
formation and maintenance of the most basic human community --
the family.  As the utopian socialists of past centuries --
including Marx and Engels -- recognized, there is a vital
connection between private property and the integrity of the
family.  Destroy the one, they reasoned, and the other will
soon disintegrate.

     Their motives were suspect but their analysis was
correct.  When the state fails to protect private property and
instead takes over the functions traditionally provided by the
family (such as education, day care, health care, sickness and
old-age support), the family unit is inevitably weakened.
Family bonds are undermined as the economic resources which
formerly allowed the family to "care for its own" are
transferred to the state.  There is little doubt that the
disintegration of the family in our country is in large part
due to state intervention.  Instead of turning towards and
receiving personal care from within the family, individuals
have been encouraged to turn towards the impersonal state.
The result has been the disintegration of family bonds.  It is
state economic intervention -- not the free market system --
which is inherently impersonal and antithetical to true human
community.

IV. Economic Power

     The objection to the market on the grounds of
impersonalism is based on the same fallacy as were the
previously discussed charges of selfishness and materialism.
Each of these claims indicts the market for ills which in fact
are common to all mankind -- faults that would exist under any
economic system.  Impersonalism, selfishness, and materialism
are the consequence of the fall of man, not the fruit of an
economic system which allows freedom.  If these sinful
tendencies are an inescapable reality, the question that must
be asked is: "What economic system best restrains sin?"

     This brings us to a fourth moral objection to the market
which is often espoused by the Christians of the left: that
the market, which is often pictured as a "dog-eat-dog" or
"survival of the fittest" system, leaves men free to oppress
each other.  It allows the economically powerful to
arbitrarily oppress the economically weak, the wealthy to
tread upon and exploit the poor.  According to this view,
wealth is power and those with wealth will not necessarily use
their power wisely and justly.  Because the nature of man is
what it is, this "economic power" must be checked by the state
and restrained for the public good.

     But does the market in fact allow individuals to exploit
others?  To begin with, there is a great deal of
misunderstanding about this thing called "economic power."
The term is in fact somewhat of a misnomer.  When we speak of
power, we normally refer to the ability to force or coerce
something or someone to do what we desire.  The motor in your
car has the power to move the car down the road; this is
mechanical power.  The police officer has the power to arrest
and jail a lawbreaker; this is civil power.  But what of
economic power?  If I possess a great deal of wealth, what
unique ability does this wealth confer?

     In reality what the critics of the market call economic
power is only the ability to please others, and thus "economic
power" is not power in the true sense of the word.  Regardless
of a person's wealth, in the free market he can get what he
wants only by pleasing another person through offering
something which the other deems more valuable.  Wealth
(assuming it is not used to buy political power) doesn't
bestow the ability to apply force to, or domineer over,
another individual.

     Take for example the employer of labor, an individual who
is often considered to be the embodiment of economic power and
an exploiter of those less powerful than himself.  It is often
forgotten that an employer can get what he wants -- employees
for his business -- only by offering something which pleases
them, namely a wage which they consider better than not
working, or better than working for someone else.  He has no
power to force them to come and work for him, but only the
power to offer them a better alternative.

     What ensures that he will want to make them a pleasing
offer?  The fact that doing so is the only way to get what he
is interested in, namely their labor, provides a very strong
incentive.  But suppose the prospective employee is in very
desperate straits and almost any wage, even one which seems
pitifully low, will please him enough to work for the
employer.  In this situation, it seems as if the employer can
get away with paying "slave wages" and exploiting the
economically weaker employee.

     This scenario, however, ignores the effects of the
competition among employers for employees.  In the market
economy, employers are in constant competition with other
employers for the services of employees.  They are
"disciplined" by this competition to offer top wages to
attract workers.  Because of competition, wages are "bid up"
to the level at which the last employee hired will be paid a
wage which is very nearly equivalent to the value of what he
produces.  As long as wages are less than this level, it pays
an employer to hire another employee, since doing so will add
to his profits.  Economists call this the marginal
productivity theory of wages.

     But what if there were no competing employers?  For
example, what about a "one-company town"?  Without
competition, wouldn't the employer be able to exploit the
employees and pay "unfair" wages?

     First of all, it is important to remember that in the
free market, an economic exchange occurs only because the two
trading parties believe that they will be better off after the
exchange.  In other words, all exchanges are "positive sum" in
that both parties benefit.  Thus if an employee in this one-
company town is willing to work for low wages, it is only
because he or she places a higher value on remaining in the
town and working for a lower wage than moving to another place
and finding a higher paying job.  The "power" that the
employer wields is still only the ability to offer a superior
alternative to the employee.  In choosing to remain and work
for a lower wage, the employee is likely considering other
costs such as those of relocating, finding another job,
retraining, as well as non-monetary costs, such as the
sacrifice of local friendships or the sacrifice of leaving a
beautiful and pleasant town.

     Moreover, this situation cannot last for long.  If the
employer can pay wages that are significantly lower than
elsewhere, he will reap above-average profits and this in turn
will attract other employers to move in and take advantage of
the "cheap labor."  In so doing, these new employers become
competitors for employees.  They must offer higher wages in
order to persuade employees to come and work for them, and as
a result wages eventually will be bid up to the level
prevailing elsewhere.

     What is true for the employer in relation to the employee
is true for all economic relationships in the free market.
Each individual, though he may be a tyrant at heart, can
succeed only by first benefiting others -- by providing them
with an economic service.  Regardless of the amount of wealth
he possesses, he is never freed from this requirement.
Economic "power" is only the economic ability to please and as
such it is not something to be feared.  Far from allowing
men to oppress each other, the free market takes this sinful
drive for power and channels it into tangible service for
others.

     It is also important to consider that the only
alternative to the free market is the political direction of
economic exchanges.  As the Public Choice theorists have so
convincingly pointed out in recent years, there is no good
reason to suppose that people become less self-interested when
they enter the political sphere.  In other words, to
paraphrase Paul Craig Roberts, there is not necessarily a
"Saul to Paul conversion" when an individual enters
government.  If he was power-hungry while he was a private-
market participant, he likely will be power-hungry after he
becomes a "public servant."

     But there is an important difference.  In contrast with
economic power, political power is truly something to be
feared because of its coercive aspect.  The power-seeking
individual in government has power in the true sense of the
word.  While in the market he has to please those he deals
with in order to be economically successful, the same is not
true, or is true to a far lesser degree, in the political
sphere.  In the political sphere he can actually abuse one
group of people but still succeed by gaining the favor of
other groups of people.

     A classic example is a tariff.  This economic
intervention benefits a small group of producers (and those
who work for or sell to the producers) at the expense of
consumers who have to pay higher prices for the good in
question.  The politician gains in power (and perhaps wealth)
because of the significant support he can receive from the
small but well-organized group of producers.  Other examples
of the use of political power to clearly benefit some
individuals at the expense of others are government bail-outs,
subsidies, price supports, and licensing monopolies.  The fact
that these types of legislation continue despite the fact that
they harm people (usually the least wealthy and most poorly
organized) demonstrates the tendency of mankind to abuse
political power.

     In fact, virtually every state intervention into the
economy is for the purpose of benefiting one party at the
expense of another.  In each of the cases mentioned above,
some are exploited by others via the medium of the state.
Therefore, if we are concerned about the powerful oppressing
the weak, we should focus our attention on the abuse of
political power.  It, and not the so-called "economic power"
of individuals acting within the free market, is the true
source of tyranny and oppression.  Our concern for the
downtrodden should not lead us to denigrate economic freedom
but rather to restrain the sphere of civil authority.

V. Conclusion

     The free market is innocent of the charges leveled at it
by its Christian critics.  Its alleged moral shortcomings turn
out to be things which are common to mankind under both free
and command economic systems.  While it is true that the free
market restrains human sin, it makes no pretense of purging
people of their selfishness, materialism, individualism, and
drive for power.  And this, perhaps, is the true sin in the
eyes of the market's critics.

     The market is explicitly non-utopian.  It doesn't promise
to recreate man in a new and more perfect state, but rather it
acknowledges the moral reality of man and works to restrain
the outward manifestations of sin.  In this sense the free
market is in complete accord with Biblical teachings.
According to Scripture, man cannot be morally changed through
any human system, be it religious, political, or economic, but
moral regeneration comes solely through the grace of God.

     If the Christian critics of the market expect an economic
system to change the moral character of people, they are sadly
mistaken.  Such a task is clearly beyond the ability of any
human institution or authority.  We must be content to
restrain the outward expression of sin, and this is something
which the free market does admirably.

[ by Ken S. Ewert ]


-- 
__________________________________________________________________________
 John Paul Morrison                     |  
 University of British Columbia, Canada |  
 Electrical Engineering                 |   .sig file without a cause
 jmorriso@ee.ubc.ca              VE7JPM |  
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