The Moral Case for Competitve Capiatlism; D. Billings

-Henry Hazlitt As KARL MARX noted in the Com munist Manifesto, capitalism is a great "engine of growth," a proposi tion with which today few informed observers of the economic scene would disagree. Yet, the free-mar ket system continues to be viewed as Professor Billings is in the Department of Econom ics, School of Business, at Boise State University in Idaho. materialistic, unjust, callous, cruel and therefore immoral by great numbers of people all over the world. This is especially true among many, if not most, intellectuals. Alexander Solzhenitsyn, in a National Review article in 1978, acknowledged that "... it is almost universally recog nized that the West shows all the world a way to successful economic development." However, and unfor tunately, he goes on "... many peo ple living in the West are dissatis fied with their own society. They despise it or accuse it of not being up to the level of maturity attained by mankind." (italics added)2 Follow ing this line of thought, the world continues to witness attempts by supposedly beneficent dictators to remake mankind in terms of some utopian, and more often than not very vaguely specified, image. Un fortunately, societies designed from above to promote morality are rarely 413 414 THE FREEMAN July successful. The Ayatollah's Iran is an excellent example of a "spiritual intolerance which does violence to mind and body."

Indeed, totalitarian regimes fre quently appeal to morality as a con venient device to assist in the sub jugation of their peoples. Henry Hazlitt cites an incident, recorded in Marx's correspondence with Engels, at the communist First Interna tional in which Marx admits that "I was obliged to insert in the pream ble two phrases about 'duty and right,' ditto 'truth, morality, and justice.' But these lamentable phrases are placed in such a way that they can do no harm."3 In fact, as Max Eastman records, "The notion of an earthly paradise in which men shall dwell together in millennial brotherhood is used to justify crimes and depravities surpassing any thing the modern world has seen."4 Considerthe Alternatives The morality or justice of the sys tem of competitive capitalism, therefore, cannot be fully appreci ated until the alternatives observed in the real world are evaluated. For as Arthur Shenfield reminds us, "It is a plain historical fact that the treatment of man by man became conspicuously more humane side by side with the rise of capitalism."5 Attitudes and policies toward the punishment of crime, treatment of women, lunatics, the feeble-minded, the lame, and in attitudes toward slavery and serfdom, the treatment of workers, changed significantly for the better during the rise of indus trial capitalism. There was even an "explosion of charitable endeavor in the countries which bore the most marked impress of capitalist princi ple and practice." The economic sys tem of private property, voluntary exchange and free markets brought with it, according to Shenfield, an improvement on what had gone be fore and very definitely an improve ment over the socialist dictatorships of the twentieth century.

For centuries in precapitalist Chris tendom men were insistently urged to lay up their treasure not in this world but in Heaven, to eschew greed and selfishness, to care for the poor, the sick, the widow and the orphan, to treat all Christians, if not others, as brothers. Yet the normal and universal treatment of man by man in every respect was so inhuman by our present standards that we would be un able to picture it to ourselves were it not that we know it to be matched in the post-capitalist socialist countries of our time. And these socialist countries are conspicuous not merely for their perva sive cruelty and oppression but also for their loud claims to be in process of building a comradely society free from greed and selfishness!6 Following the lead of the econo mist Benjamin Rogge, it is in fact the case that ". . . the most impor tant part of the case for economic freedom is not its dramatic success 1983 THE MORAL CASE FOR COMPETITIVE CAPITALISM 415 in promoting economic growth, but rather its consistency with certain fundamental moral principles of life itself."? For personal freedom, and therefore economic and political freedom, is not "ethically indiffer ent" but a necessary condition of' morality. Friedrich Hayek reminds us of certain fundamental condi tions of the moral life.

It is ... an old discovery that morals and moral values will grow only in an environment of freedom, and that, in general, moral standards of people and classes are high only where they have long enjoyed freedomand proportional to the amount of freedom they have pos sessed ... That freedom is the matrix re quired for the growth of moral values indeed not merely one value among many but the source of all values-is almost self-evident. It is only where the individ ual has choice, and its inherent respon sibility, that he has occasion to affirm existing values, to contribute to their further growth, and to earn. moral merit. 8 Moralityand the Market It appears that the free market system, in which only voluntary and mutually beneficial exchange are permitted, is a necessary condition for a moral order in which the integ rity of the individual conscience is respected. Hayek points out in The Road to Serfdom that only: where we ourselves are responsible for our own interests ... has our decision moral value. Freedom to order our own conduct in the sphere where material circumstances force a choice upon us, and responsibility for the arrangement of our own life according to our own conscience, is the air in which alone moral sense grows and in which moral values are daily recreated in the free decision of the indi vidual. Responsibility, not to a superior, but to one's conscience, the awareness of a duty not exacted by compulsion ... and to bear the consequences of one's own de cision, are the very essence of any morals which deserve the name. 9 "Surely," adds Hayek on another oc casion, "it is unjust to blame a sys tem as more materialistic because it leaves it to the individual to decide whether he prefers material gain to other kinds of excellence."l0 What ever the goals ofindividuals, whether virtuous or not, the "vulgar calculus of the marketplace" still seems to be the most humane way mankind has found for dealing with the economic problems of scarcity and the difficult allocation of resources.

Murray Rothbard forcefully .re minds us that "... in a world of vol untary social cooperation through mutually beneficial exchanges ... it is obvious that great scope is pro vided for the development of social sympathy and human friendships." Indeed, "it is far more likely that feelings of friendship and commu nion are the effects of a regime of contractual social cooperation rather than the cause."ll Capitalism tends to favor those who respect the sanctity of their 416 THE FREEMAN July contracts because of the respect for and enforcement of private property rights. The work ethic, encouraged by the institution of private prop erty, represents an important source of moral responsibility as well as a continuous reminder that our ac tions always entail costs-a perva sive characteristic of human exis tence. These essential ingredients of a free market order, Arthur Shen field tells us, define a set of social institutions which encourages mu tual respect for each and every in dividual.

What we want above all for ourselves, and which therefore we must accord to our neighbor, is freedom to pursue our own purposes . . . As a corollary to this freedom we want others to respect our individuality, independence, and status as responsible human beings ... This is the fundamental morality which capital ism requires and which it nurtures. It alone among economic systems operates on the basis of respect for free, indepen dent responsible persons. All other sys tems in varying degrees treat men as less than this. 12 PeacefulTrade The processes by which we satisfy human wants through social coop eration, do not, of course, exhaust the purposes to which individuals aspire. The search for personal hap piness and inner peace must be found within the individual alone. Never theless, mankind's social relation ships are generally far more peaceful under a system ofprivate property and free trade. The period between the Napoleonic Wars and the first World War, the heyday of competi tive capitalism, represented a cen tury relatively free of the brutality of war.

Furthermore, Shenfield, Hayek and others remind us that competi tive capitalism was the first social system in human history to direct man's desire to become rich to the peaceful supply of greater quan tities of goods and services for his fellow human beings, especially greater abundance for the working class and the poor. And remember, Shenfield warns us, "The altern a tive to serving other men's wants" through voluntary exchange "is seizing power over them." Where so cialism has prevailed it has invari ably meant not only lower living standards for most people "but also their reductions to serfdom by the new privileged class of socialist rul ers."13 The case for the morality and jus tice of the system of capitalism rests on the intimate and complementary connection which exists between private property and voluntary ar rangements and the sovereignty of the individual over his own life. In fact, "one might say that capitalism, far from dehumanising man, al lowed him at last to assume the full individuality which Christianity had always accorded him as the pos1983 THE MORAL CASE FOR COMPETITIVE CAPITALISM 417 sessor of a distincti ve moral con science." Paul Johnson reminds us, however, that "... we tend to take the concept of individuality for granted. Yet it is a comparatively modern idea-no older than capital ism; scarcely older than the Indus trial Revolution."14 Free and Responsible The "dawn of conscience," that point in history in which individuals were first argued to be morally free and therefore responsible for their actions, appeared in Egypt and was borrowed and developed by the Jews.

Jesus and his interpreter, St. Paul, in the New Testament outlined a view which recognized the unique personality of each human being. It is essentially an individualistic view of mankind in which, for the first time, the individual's soul is the most important thing about him. Christi anity provided an environment in which individuals, to gain salvation, made choices from a position of free will. Not only did the Church find that individual souls were worth saving, but Christianity also "implanted the concept of the rule of law," and con tributed importantly to the estab lishment of the idea of freehold property and the land deed in the western world. Admittedly, these contributions were largely to protect the Church and its institutions and property from the power of the State. But over time the principle of the rule of law and the private owner ship of property were progressively expanded to the relationships be tween individuals. "The connection between Christian morality and capitalism thus centers· essentially around the role and importance of the individual," according to Paul Johnson: More than to any other force, then we owe the acknowledgement of our individ uality to capitalism, ... And individual ism is rooted in the J udaeo-Christian doctrine of conscience and free will. Free will implies choice: the moral function of society, the way in which it best serves the moral needs of the individuals who compose it, is when it facilitates the pro cess of choice, permits consciences to in form themselves, and so offers the indi vidual the greatest possible opportunity to fulfill his part ... That, essentially, is the moral basis of capitalism. 15 We conclude, therefore, that the system of free and open markets is most conducive to the perfection, or at least improvement, of man's free will and tends to generate and make possible moral behavior. While it is admitted that society itself cannot be moral or immoral, only individu als are moral agents, it would ap pear, following the arguments de veloped by Arthur Shenfield, that an economic system, "if its essential characteristics on balance positively nurture or reinforce moral or im moral individual behavior, it is a moral or immoral system in its ef418 THE FREEMAN July fects." (italics added)16 Where justi fiably acquired property rights are defended, and where contracts are enforced, and where the rule of law applies, then "the voluntary nature of capitalist transactions propels us into respect for others."

For John Stuart Mill, justice is likewise a moral issue: Whether the injustice consists in de priving a person of a possession, or in breaking faith with him, or in treating him worse than he deserves, or worse than other people who have no greater claims, in each case the supposition implies two things-a wrong done, and some assign able person who is wronged ... Justice implies something which it is not only right to do, and wrong not to do, but which some individual person can claim from us as his moral right. 17 "Justice, in brief," Henry Hazlitt maintains in The Foundations of Morality, "consists of the social ar rangements and rules that are most conducive to social cooperation." Therefore we conclude that a system of institutional arrangements called "capitalism" (a disparaging refer ence for many people, the reader is reminded) is unquestionably more consistent with justice in this sense than any alternative set of social ar rangements even conceivably avail able to us. The obviously immoral character of the socialist dictator ships in Poland, Cuba, East Ger many, the Peoples Republic of China, the Soviet Union, or for that matter the right-wing fascist dictatorships which abound, where the most ele mentary human freedoms are su pressed and where millions of hu man beings have been murdered in the name of a new social order, doc uments the case for the private property, decentralized market sys tem.

The great French economist and social critic Frederic Bastiat, writ ing in the nineteenth century, cap tured what would be the desirable characteristics of a truly just and moral order. He asked the question: Which countries contain the most peaceful, the most moral, and the happi est people? Those people are found in the countries where the law least interferes with private affairs; where the govern ment is least felt; where the individual has the greatest scope, and free opinion the greatest influence; where the admin istrative powers are fewest and simplest; where taxes are lightest and most nearly equal; ... where individuals and groups most actively assume their responsibili ties, and, consequently, where the mor als of ... human beings are constantly improving; where trade, assemblies, and associations are the least restricted; ... where mankind most nearly follows its own natural inclinations; ... in short, the happiest, more moral, and the most peaceful people are those who most nearly follow this principle: although mankind is not perfect, still, all hope rests upon the free and voluntary actions of persons within the limits of right; law or force is to be used for nothing except the admin istration of universal justice. 18 1983 THE MORAL CASE FOR COMPETITIVE CAPITALISM 419 In light of these arguments by Hazlitt, Shenfield, Bastiat and the others, a very interesting and im portant question remains to be asked.

Why is it that a system of social or ganization which has produced his torically unprecedented increases in living standards in those countries where the principles were practiced and which simultaneously did so much to reduce man's inhumanity to man during its ascendancy has come to have such a low standing in the minds of so many millions of people? Hayek is right when he in sists that we must once again make the study of freedom an exciting in tellectual issue. Ii -FOOTNOTESIHenry Hazlitt, The Foundations of Morality (Los Angeles: Nash Publishing Co., 1964), p. 302. 2Alexander Solzhenitsyn, ''A World Split Apart," National Review, July 7, 1978, p. 839. 3Hazlitt, p. 340. 4Ibid., p. 341. 5Arthur Shenfield, "Capitalism Under the Thst of Ethics," Imprimis (Hillsdale College: Michi gan), December 1981, p. 4. 6Ibid., p. 4. 7Benjamin Rogge, "The Case for Economic Freedom," The Freeman, February 1981, p. 86.

8Hazlitt, p. 322. 9Friedrich A. Hayek, The Road to Serfdom, cited in Leslie Snyder, "Justice and Freedom," The Freeman, March 1980, pp. 186-187. 10Quoted in Hazlitt, p. 323. llMurray N. Rothbard, Man, Economy and State (Los Angeles: Nash Publishing Co., 1962), p.86. 12Shenfield, p. 6. 13Ibid.,p. 5. 14Paul Johnson, "Is There a Moral Basis for Capitalism," PAIDEIA, Spring 1980, p. 3. 15Ibid.,p. 3. 16Shenfield, p. 4. 17Snyder, p. 183. 18Ibid.,p. 187. IDEAS ON LIBERTY The Case for Economic Freedom THE DOCTRINE of man held in general in nineteenth century America argued that each man was ultimately responsible for what happened to him, for his own salvation, both in the here and now and in the here after. Thus, whether a man prospered or failed in economic life was each man's individual responsibility: each man had a right to the rewards for success and, in the same sense, deserved the punishment that came with failure. It followed as well that it is explicitly immoral to use the power of government to take from one man to give to another, to legalize Robin Hood. This doctrine of man found its economic counterpart in the system of free enterprise and, hence, the system of free enterprise was accepted and respected by many who had no real understanding of its subtleties as a technique for organizing resource use.

BENJAMIN A. ROGGE WilliamH. Peterson FarmPolicy NOWWHA1? PRESIDENT REAGAN proclaims his new payments-in-kind (PIK) pro gram to give farmers surplus grain plus cash if they cut production sub stantially in the next two years as "highly innovative." Is it really? FDR had a similar program for cotton farmers, and President Kennedy had much the same scheme for feed-grain producers. Neither the Roosevelt nor Kennedy plan proved effective. Indeed, more than a half-century of aggressive farm intervention costing hundreds of billions of dol lars in subsidies spells out a record of unremitting failure and frustra tion' with the farmers themselves the ultimate losers. In 1929, for example, President Hoover set up the Federal Farm Board to stabilize crop prices. By the end of his administration the Board had gone through more than $300 Dr. Peterson is the director of the Center for Eco nomic Education and the Scott L. Probasco Jr. Pro fessor of Free Enterprise at The University of Tennes see at Chattanooga.