Capitalism and Morality; E. Coleson

capitalism. Everything that is con sidered unsatisfactory in present day conditions is charged to capi talism." Thus wrote Ludwig von Mises in 1947.1 But the bad repu tation of capitalism is of long standing. John Ruskin denounced Adam Smith as "... the half-breed and half-witted Scotchman who taught the deliberate blasphemy: 'Thou shalt hate the Lord, thy God, damn his law, and covet thy neigh bor's goods.'''2 Marxists and Fa bian Socialists have built up a large library of anticapitalist prop aganda over the years. In times of economic crisis the Dr. Coleson is Professor of Social Science at Spring Arbor College in Michigan. This article is from an address delivered July 3, 1973, at the Summer Institute at Hillsdale College. opposition to capitalism becomes even more pronounced. During the Great Depression in a book co-au thored by a number of prominent churchmen, we were told: "The whole future of Christian societies depends on whether Christianity, or rather Christians, decisively leave off supporting capitalism and social injustice .... "3 Such pro nouncements could be cited almost without number. In the recent past it was assumed that the more ortho dox and evangelical wing of the Christian movement was more kindly disposed toward capitalism, and there is statistical evidence to support this view; but now a group of exceedingly vocal evan gelicals have appeared who de nounce this traditional economic and political conservatism as un christian.

625 626 THE FREEMAN October It would appear to me that one of our most urgent tasks is to try to understand this bitter animos ity against capitalism by men of intelligence, social concern, and even Christian faith. Certainly, part of these socialistic and. com munistic dissenters have a vested interest in the destruction of capi talism and our nation too. Yet many are· honest men of good will who oppose a market economy be cause they fail to understand it. No Pre-Industrial Utopia In point of time, the first fallacy to contend with is the pre-capital ist state of society. It is easy to dream up an idyllic and utopian age when unspoiled peasants lived life to the full close to nature, a medieval version of Rousseau's "Noble Savage" in a primitive paradise. Actually, Hobbes' insis tence that life in a state of nature was "nasty, brutish and short" is closer to the truth. Adam Smith mentions that in his time, "It is not uncommon . . . in the High lands of Scotland for a mother who has borne twenty children not to have two alive."4 Remember, this was as recent as two centuries ago.

Another writer tells us "that the deaths in all medieval towns large ly exceeded the births, so that the towns only survived by constant recruitment from the country .... "5 Famines were frequent and severe. More recently, E. A. Wrigley claims that in certain French par ishes, which he studied in detail, the death rate was proportional to the price of grain back nearly three centuries ago. 6 And pollution - you should have seen and smelt it - back when everything was thrown into the streets. The pre industrial state of affairs was no paradise, even if conditions did not improve as fast as they should have as we moved into the modern period. The contention that every thing was lovely until the vicious capitalist played the serpent to that Eden is not supported by the facts of history. Another notion is that life was relatively simple in the pre-capi talistic social and political order.

The reasoning is as follows: life was simpler in the 1890's than it is today and - by an extension of the same logic - it must have been even more simple in the 1690's or 1590's. Wrong again. Life was rel atively simple in the late Victorian period as a few surviving oldsters still remember; but the 1690's were as much like today as a pre ind ustrial society could be. As one example, in France "it took more than two thousand pages to print the rules established for the textile industry between 1666 and 1730."7 Punishment for breaking these regulations was severe. Multitudes of people died for economic of1973 CAPITALISM AND MORALITY 627 fenses that ought never to have been considered crimes. And, re member, all of this happened be fore the Industrial Revolution made life complicated - or so we are told. It should be obvious that this complexity grew, not out of the necessities of the situation what did they need of thousands of pages of textile "codes" in the days of hand weavers - but out of a philosophy of government. As has been said, the men of that age "displayed a marked belief in the efficacy of government to achieve any and all desired· ends by means of legislation."8 How modern!

Adam Smith and the Rule of Law Another common idea is that Adam Smith was an anarchist. Nowadays if one admits that he believes in free enterprise, he is often reminded that we must have government. There are many an archists in our midst today and it appears their numbers are increas ing - perhaps a reaction to the ex cesses of statism - but anarchy is not a necessary alternative to total government control. Smith dis tinguished between what he called "the laws of justice" and the inane attempts of various pressure groups to rig the market in favor of their petty interests. 9 To Smith the task of government was the administration of justice, not the job of running everybody's business. He also thought the govern ment .should protect the nation from foreign invasion and main tain "certain public works and cer tain public institutions" for the general welfare, apparently serv ices hard to charge for, such as the use of a lighthouse or the street and sidewalk in front of your house. It is obvious that Smith believed in government, but thought, like Thomas Jefferson, that it should be a "simple, frugal affair." Many people today are turning again to those two classics of 1776, The Wealth of Nations and the "Declaration of Indepen dence." Let's hope that limited government is coming back in fashion.

Capitalism and Greed Another common fallacy is the idea that Adam Smith sanctified greed, that free enterprise is bru tal- "every man for himself and the devil take the hindmost." Again, this has been a common view, held by both capitalists and socialists. However, this was not Smith's version of capitalism. This misconception has no doubt been the most damaging to free enter prise of all the accusations leveled against the system: both Chris tians and humanitarians denounce it as evil and vicious. Henry Thom as Buckle, an English historian of the last century, made an interest628 THE FREEMAN October ing observation on this problem. He pointed out that in his earlier book, The Theory of Moral Senti ments, Smith emphasized sym pathy, and then seventeen years later he published The WeaUh of Nations dedicated to the proposi tion that "... the great moving power of all men, all interests and all classes, in all ages and in all countries, is selfishness." This is the common view, except that most people do not know about his ear lier devotion to compassion. Buckle described what appeared to be a dramatic change in Smith's out look: In this way Adam Smith complete ly changes the premises he had as sumed in his earlier work. Here, he makes men naturally selfish; former ly, he had made them naturally sym pathetic. Here, he represents them pursuing wealth for sordid objects....

It now appears that benevolence and affection have no influence over our actions. Indeed, Adam Smith will hardly admit humanity into his theory of motives.lO Since Buckle considered The Wealth of Nations as "probably the most important book which has ever been written," he seems to have had no prej udice against its author. He explains the apparent inconsistency, the obvious shift in philosophical position, by saying that Smith was investigating both sides of the same problem, that the books were "compensatory rather than hostile," that one supplement ed the other, that we all have a streak of sympathy and also of selfishness in our make up. What ever Smith's intent, the image of greed has come through to the general public. However, I suspect that the people who talk the loud est about the problem have never read The W ealth of Nations. One of our contemporaries, Richard C. Cornuelle, has also tried to resolve the dilemma. He begins with Mandeville's familiar Fable of the Bees, published in 1705, a satire written to prove "Private Vices make Public Bene fits," as the subtitle tells us. The question was whether the individ ual man's greed did or did not pro mote the general welfare by in creasing economic activity and hence the standard of living for everybody. The older view was that no one could gain except at other people's loss, that we can only enrich ourselves by impov erishing others. As Cornuelle tells us, Mandeville merely stated the "pri vate vices - public benefits" dilemma.

It was left to Adam Smith to resolve it. In his monumental Wealth of Na tions, he told the world clearly and comprehensively what made com merce work. There is an astonished 1973 CAPITALISM AND MORALITY 629 tone in his work, as if he could hardly believe his own discoveries .... 1l Smith had discovered to his amazement that the true long range self-interest of each individ ual was compatible with everyone else's welfare, that what was good for one was best for all. If this is true, there is no necessary conflict between Adam Smith's earlier philosophical system founded on sympathy and the alleged greed. of The Wealth of Nations. As Smith said, the businessman in seeking his own interest is "led by an in visible hand" to promote the gen eral welfare, "an end which was no part of his intention."12 This is an attractive idea: what is good for the farmer is good for the con sumer, what is good for labor is good for management, what is good for Russia, Red China, Cuba, and our more friendly neighbors is good for the United States and vice versa. This sounds great, but is it true?

If we assume that what is good for each is good for all, the next question is whether we will auto matically know what is right and spontaneously do it. Of course, we need to differentiate between blind greed and enlightened self interest, but even then there is little historical evidence to support the view that we will necessarily know the right and do it. Unfortunately, there was a tendency after the .publication of The Wealth of Nations to assume that if businessmen "did what came naturally" that the consequences would surely be good. ,It should be remembered that about the time Adam Smith was born Newton captured the popular imagination with his famous solu tion of the riddle of the universe, the so-called "Newtonian synthe sis" of the astronomy and physics since 1543, the work of Coperni cus, Kepler and Galileo. As a con sequence, it became the fashion to look for mechanical laws of human behavior, of society, of govern ment and of the life of man in every dimension. Men had become machines. Malthus' famous essay of 1798 warned that population would automatically outrun any possible increase in the supply of food so that no improvement in the human condition would be pos sible.Little wonder that he and his good friend Ricardo earned for economics the nickname, that "dis mal sci ence."

English Reform and Free Trade If a few intellectuals were pre pared to let Nature take its course back then, the "do-nothing" social policy so often associated in the popular view with laissez faire, certainly there was no lack of re form efforts before and after 1800.

630 THE FREEMAN October It was during these decades that William Wilberforce and the Clap ham Sect were laboring mightily for the abolition of slavery. It was really not a good time to push re for~ either, since the French Rev olution began in 1789 and the world was not done with Napoleon until after Waterloo in 1815. While the conflict was not continuous for this quarter of a century, wars and rumors of wars were the rule. In spite of the turmoil, Wilber force and his associates got the English share of the slave trade (the transportation of slaves from Africa to the Americas) outlawed in 1807. After the Napoleonic . Wars the British government and the Royal Navy worked diligently to suppress the commerce in slaves altogether and pressured other governments into cooperating. After the Civil War, with its Emancipation Proclamation plus the abolition of slavery in the Latin American nations to the south of us about the same time, it appeared that the future of human freedom was secure. Re form had paid off.

During the long decades of the struggle against slavery there were those who argued eloquently that the best thing to do about slavery was to ignore the problem; maybe it would go away of itself. Indeed, it may seem a paradox that Englishmen who were going laissez faire in economics should at the same time have been work ing diligently to suppress slavery far from their shores and in lands where they had no jurisdiction. It would have seemed logical for them to have tended to their own business, the job of making money, and to have let slavery "wi ther away." This is an exceedingly impor tant point. The English reformers of the early and middle nineteenth century were not anarchists. They believed in freedom under law God's Law - and since slavery was clearly contrary to God's Law, they were working for its aboli tion. It would certainly be a revo lution today if all laws and politi cal arrangements that had no moral justification should be abol ished. Perhaps we have grown too tolerant of the powers that be.

The Nazi and Communist oppres sion of the last half century has shown that power corrupts, that progress is not inevitable, and that freedom is not automatic. The great English reform effort of the last century is misunder stood and largely forgotten, yet their accomplishments were enor mous. Wilberforce and his associ ates accomplished, more of a con structive nature than any reform movement in history.la It was out of this context that Victorian free trade and free enterprise came, 1973 CAPITALISM AND MORALITY 631 and the leaders of the movement which made it happen were devout Christians who regarded their campaign as a holy crusade. Be fore free trade became a popular issue, the British had abolished plantation slavery in their colonies (Wilberforce died as the abolition bill was being debated in Parlia ment in 1833, but lived long enough to know it would pass) ; to many Englishmen free trade and free enterprise were just the· next logical national objectives. In one of the first lectures delivered un der the auspices of the fledgling free trade movement " ... it was stated that the organization was established on the same righteous principle as the Anti-Slavery So ciety." 14 Although everyone recog nized that these were economic questions, the posture of righteousness and reform was main tained throughout the campaign.

Repeal of the Corn Laws The focus of the economic re formers' attention was· the "Brit ish farm program," the famous Corn Laws, a complicated system of tariffs which was devised to keep out foreign grain until do mesticprices became prohibitive. To Richard Cobden, John· Bright, and other members of the Anti Corn Law League, this practice of keeping food needlessly scarce and expensive was criminal and wicked, and no amount of legislation would make it moral. Even that distinguished reformer Lord Ash ley, the seventh Earl of Shaftes bury, a landed aristocrat who had nothing to gain and perhaps much to lose if English markets were flooded with America's agricul tural abundance, voted for free trade in food because it was right. By contrast, those of us who re member .forty years of Federal farm programs since Henry Wal lace "plowed under cotton and killed little pigs" in the spring of 1933, recall little attempt to ap proach the problem ethically. Such was not the thinking of the early Victorians. A great conference of the clergy was held at Manchester and many ministers began to preach that the corn laws were "anti-scriptural and anti-religious, opposed to the law of God." The League produced and distributed many tons of propaganda leaflets.

It has even been claimed "that there was not one literate person in all of Great Britain who had not read of the League and its work by the end of 1844,"15 a degree of saturation it would be hard to achieve even today. This enormous effort paid off. By 1846, the League succeeded in abolishing the hated Corn Laws, and a flood of cheap grain from America inundated the British (and later Western European mar632 THE FREEMAN October kets) and provided the common working man with a decent diet at a reasonable price. In the next few years the British abolished their remaining tariffs, which their neighbors tended to do also. The stage was set for the enormous growth of world trade in the late Victorian period, a burst of cre ative activity which promoted prosperity and economic develop ment around the world and in the United States too. Their faith in freedom was not ill-founded. The English free traders were opti mists who "were much embar rassed . . . by the dismal parts of the dismal science," as expounded a generation earlier by Malthus and Ricardo. They "avidly seized upon the purified version of eco nomics presented by the French man, Frederic Bastiat."16 These men believed that progress and peace were the fruits of a proper economic policy, and in the short run, at least, this seemed to be the case. Those in our midst who are oppressed and depressed by the strife, turmoil, and seemingly permanent poverty of vast areas of the world today, would do well to study the Victorian example.

Then and Now Certainly, these men and their times make an interesting topic for study, particularly the' con trasts between then and today. As one author says" . in the early nineteenth century the upper mid dle-class elite believed in piety, re form of Church and State, moral action and laissez-faire econom ics." 17 When comparing their day and their reform. efforts with our own, the historian of the fu ture will, if he is fair, say of them, "Never did so few accom'.. plish so much with so little." Of our massive multi-billion-dollar at tempts at remaking the world in our own time he must say, "Never did so many accomplish so little with so much." Perhaps capitalism has much more to offer than we have realized for a long, long time. With socialist schemes collapsing all about us, it is time that we try to understand how it worked. Faith and Freedom It is easy to dismiss favorable comments on Victorian economic policy as p~ocapitalist propaganda, and there is some of that along with a flood of the socialist vari ety. One of the most glowing evaluations of free trade and free enterprise that I have ever seen was written by an Austrian social ist, Karl Polanyi, a few years ago.

He tells us that "the self-regulat ing market . . . produced an un heard-of material welfare."lR As if this were not a sufficient achieve ment, he says, "The nineteenth century produced a phenomenon 1973 CAPITALISM AND MORALITY 633 unheard of in the annals of West ern civilization, namely, a hun dred's years' peace - 1815-1914," from Waterloo to the "Guns of August" in 1914. (I should hasten to add that he is aware of the Crimean War and the Franco Prussian conflict but he regards them as fairly minor disturbances. The Civil War, of course, was in America, not Europe.) After this panegyric on capital ism, a tribute as much in superla tives as Hazlitt or von Mises might manage in their most enthusiastic moments, Polanyi then warns us that the market economy" ... would have physically destroyed man and transformed his surroundings into a wilderness." What frightens him about freedom is what people might do, and have done, when you turn them loose. When one ponders the history of freedom from the days of the Roman Republic to the present, he realizes that Polanyi's fears.are not unfounded.

In ,other words, there is only free dom over time for highly respon sible and moral people .. Free mar kets and free governments must be based on solid ethical foundations, a point that Edmund Burke saw clearly in the early days of the French Revolution: Men are qualified for civil liberty in exact proportion to their disposi tion to put moral chains upon their own appetites ... society cannot exist unless a controlling power upon will and appetite be placed somewhere, and the less of it there is within, the more there is without. It is ordained in the eternal constitution of things that men of intemperate minds can not be free. Their passions forge their fetters. ~ • FOOTNOTES • 1 Ludwig von Mises, Planned Chaos, p.17. ~ Robert B. Downs, Books that Changed the World, p. 43. 3 Christian Message for the World To day. E. Stanley Jones and nine other churchmen are listed as the authors. The quotation from Chapter II, page 45, was apparently written by Basil Mathews.

4 Adam Smith, The Wealth of Nations (Modern Library edition), p. 79. 5 Warren S. Thompson, Population Problems, p. 73. 6 E. A. Wrigley, Population and His tory, p. 66. 7 John Chamberlain, The Roots of Cap italism, p. 20. 8 John M. Ferguson, Landmarks of Economic Thought, p. 36. 9 Smith, p. 651. 10 Henry Thomas Buckle, History of Civilization in England, Vol. II, pp. 340 354. 11 Richard C. Cornuelle, Reclaiming the American Dream, pp. 47-48. 12 Smith, p. 423. 13 Earle E. Cairns, Saints and Society, p.43. 14 George Barnett Smith, The Life and Speeches of the Right Hon. John Bright, M.P., Vol. I, p. 133. 15 Dean Russell, Frederic Bastiat: Ideas and Influence, p. 66. 16 Ibid., p. 69. 17 Robert Langbaum, The Victorian Age, p. 9. 18 Karl Polanyi, The Great Transfor mation, pp. 3-5.