"Is Capitalism Moral?"

The Rap eCapitalism is an amoral, dog-eat-dog system founded on greed and the survival of the fittest.

The Reality eCapitalism is the world's most humane economic system, promoting the democratic values of a free and open society: hard work, cooperation, generosity, charity, and devotion to the rule of law.

Is capitalism moral? The question has been debated since before the days of Karl Marx. But it has more relevance today than ever in the wake of the recent financial crisis and recession.

Capitalism's critics insist that evidence of its "immorality" is everywhere--from the collapse of Enron in the early 2000s to the "predatory lending" that helped bring on the subprime-mortgage meltdown and subsequent recession to investment adviser Bernard Madoff's mammoth $50 billion Ponzi scheme that wiped out personal and institutional fortunes around the globe. These and other events, they say, demonstrate that the free market is a winner-take-all jungle, a place where the most ferocious and dishonest triumph, where nice guys finish last, where greed rules and people get ahead by exploiting others.

No doubt there can be bad behavior in a capitalist system. There is bad behavior in any society. However, when viewed as a system, capitalism is more moral than any and all alternatives.

Capitalism has produced the world's highest standard of living by promoting the moral values of cooperation, democracy, and free choice. Nobel Prize--winning economist and noted free-market advocate Milton Friedman frequently made the point that capitalism's foremost historic contribution has been its moral influence.

As we started to discuss in the introduction to this book, capitalism is not about selfishness, but about the needs and wants of others. Former U.S. ambassador, noted theologian, and author Michael Novak makes this point:

The capitalist economy is not characterized, as Marx thought, by private ownership of the means of production, market exchange, and profit. All these were present in the precapitalist aristocratic age. Rather, the distinctive, defining difference of the capitalist economy is enterprise: the habit of employing human wit to invent new goods and services, and to discover new and better ways to bring them to the broadest possible public.1

Adam Smith explained in his classic work The Wealth of Nations that the exchange of goods and services in a market takes place only if both sides benefit. Such mutually beneficial exchanges, multiplied by the hundreds of millions, form what Smith referred to as "the invisible hand." The classic example of the pencil illustrates how these exchanges spontaneously allocate resources in a way that benefits more and more people.

To see the benefits of the Invisible Hand, one need only look around at the profusion of entrepreneurial businesses in most American communities. The vast array of goods and services generated by our vibrant democratic capitalist economy is unequaled: from 24-hour gyms and copy centers to supermarkets with countless varieties of food to even day spas in airports. The open markets of democratic capitalism meet needs that people don't even realize they had. Who ever would have imagined, for example, that we would need social networking sites such as Facebook? Or that you'd want to get a massage at an airport? Millions of Americans--and people around the world--now use Facebook and other similar sites every day, and they benefit from an Internet industry that began in the United States.

Free markets don't just meet the needs of the majority. If there's something people want or need, entrepreneurs in an open market will figure out a...

 

STEVE FORBES is chairman, CEO, and editor in chief at Forbes Media and an internationally respected authority in the worlds of economics, finance, and corporate leadership. He campaigned twice for the Republican nomination for the presidency. His previous books include Flat Tax Revolution, A New Birth of Freedom, and the New York Times bestseller Power Ambition Glory.

ELIZABETH AMES is founder of BOLDE Communications, which advises corporate and individual clients on communications strategies. Her work as a writer and journalist has appeared in a variety of magazines and newspapers.

 

How Capitalism Will Save Us by Steve Forbes
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