A friend who shall remain nameless sent to me today a link to a YouTube video of some commie folk singer who doesn’t much like capitalism.

You know the drill:  For reasons that are never quite made explicit, capitalism is cold, heartless — nay, even immoral.  Why?  That’s never articulated with any semblance of reason; it’s merely asserted with the breathless self-assurance of those who are immovably convinced of their own wisdom and rectitude.

Nevertheless, I shall attempt to reconstruct the hard-left claim against capitalism with an eye toward rebutting it, whilst manfully avoiding the tendency to slip into strawman-ism.

The criticisms of capitalism are several:

  1. Some people succeed; others fail.  This is true.  The question is, why is this problematic?  And why does the fact that individuals can win or lose mean that the game itself is unfair?
  2. Capitalism doesn’t have a safety mechanism for dealing with failure.  Failure is necessary to limit the spread of inappropriate risk.  When the effects of failure are mitigated, there is a greater incentive toward engaging in risky behavior — the subprime lending situation is a case in point.  And so is the crisis in the family arising from state welfare benefits.  When the risk/reward calculation skews in favor of "reward," people are more likely to take the risks necessary to obtain that reward, even when they’re not well-positioned to succeed.  This is Psych 101.  And when the state intervenes to protect people from the consequences of risk, then we don’t really have capitalism anymore, we have a form of state socialism, however weak it may be.  Failure is necessary to preserve the value of appropriate risk, and to guard against overreaching for a reward.
  3. The profit motive leads to immoral behavior — especially greed.  Perhaps.  But the personal moral response to economic incentives is not a reason to condemn an economic system; if it were, then socialism, communism, anarchism — all of it! — is off the table, because these systems facilitate responses by citizens that could similarly be characterized as immoral (envy, chief among them).  But ethics aside, the profit motive leads to hard decisions that can lead some people to pain, as when jobs move overseas or plants close.  My desire to make an extra $10,000 to take a diving trip in the Marquesas might prompt me to close a business and fire five employees.  Is this bad?  Some argue that it is, but it’s not clear why I as an employer have an affirmative duty to ignore my own self-interest for the sake of another person’s convenience.  Capitalism isn’t about beneficence or about enlightened self-denial for the sake of others; capitalism is about the most efficient use and distribution of scarce resources.  All things being equal, nothing is more effective at efficiently allocating goods and services than the profit motive, and the profit motive is animated by the desire for personal gain.  Hence the risk/reward situation.  If I choose to quit my job and start my own company, I run the risk of complete ruin, but I could be highly successful.  If I’m highly successful, and I choose to fire an employee to improve my profit margin, am I a monster?  Or am I merely enjoying the fruits of my earlier labors? 
  4. People are often exploited in a purely capitalist system.  Rubbish!  Everyone makes choices.  Sometimes, people don’t have the wherewithal to make wise decisions — decisions that are strategically prudent.  Today’s high school grads who head straight into a factory or construction job are an excellent case in point.  We know that manufacturing is not the cash cow for workers that once it was, yet many choose to forego college or additional vocational training and instead head to the job site with a hard hat and a lunch pail.  They have every right to do this.  They also have every right to collect the relatively modest paychecks they’ll be earning.  But wait, there’s more — they even have the right to face economic insecurity on account of their freely contracted employment decisions, and they’re also free to better themselves and move to another industry or geographic region if they’re not satisfied with their present remuneration or working conditions.  The idea that workers have no choice in a capitalist system is a work of fiction as fanciful as Dickens and as wrongheaded as Malthus.  No one is exploited in a free capitalist system without their consent.

So, the question becomes, is capitalism not just "not bad," but can it be intrinsically good?  Let’s see:

  • Capitalism promotes merit.
  • Capitalist systems reduce waste.
  • The desire for profit means the economy tends to grow with real wealth, thus providing opportunities for workers who choose not to put themselves at risk in the capital markets.

It’s easy to be avant garde and decry capitalism and its alleged excesses.  But what’s better than capitalism as an economic system?  When a cogent counter-system is proposed, I will be willing to listen.  Until then, the self-important diatribes against capitalism will not find my ear to be especially sympathetic.

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