A (Brief) Moral History of Capitalism

Even those few of my readers who have studied economic theory or the history of economics probably studied them long ago and not entirely voluntarily. As a result, names like Adam Smith have a musty scent to them, suggesting something that happened long ago and far away and that couldn't have much relevance to twenty-first century America. Whatever capitalism might have meant in the early days before the Industrial Revolution, we are thinking, surely it means something quite different today. But in fact the fundamental tenets of market theory are as profoundly important to modern economies as they were profoundly important to economies two or three centuries ago.

And what is of central importance today, as it was 300 years ago, is the moral character of capitalism. Serious critiques of the effectiveness of market economies versus other forms of economic organization have almost completely disappeared, buried by the stunning success of capitalism. To argue, early in the twenty-first century, that some other system might produce superior economic results would be to mark ourselves as serious ideologues. But moral critiques of capitalism have always been with us, and probably always will be. It simply can't be denied that market economies are designed in part to appeal to aspects of human nature that don't exactly represent our proudest moments. If human beings weren't selfish, weren't inclined to be lazy, didn't instinctively mistrust anyone outside our own families, didn't love power and luxury—well, in that case other, gentler, more charming economic systems would certainly be preferable.

Nor can it be denied that capitalism forces wrenching changes in traditional ways of life. If the craft guilds of Germany couldn't compete with the vast new industrial enterprises in England, the craft guilds would disappear, and along with them would disappear an entire, traditional way of life. If family farms in the American Midwest can't compete with “factory” farms, family farms will disappear, and along with them will disappear hundreds of small towns that once represented the backbone of America. To argue that nothing is lost in such transitions would be harsh, indeed.

Finally, capitalism always and everywhere results in unequal economic outcomes, with some citizens becoming remarkably wealthy while others remain poor and most end up in middle income categories.

But it is possible to mount a thoughtful defense of the moral properties of capitalism, and it is useful to remind ourselves of this fact. Indeed, virtually all the early proponents of market economies were drawn to them precisely because they were perceived to be morally superior to other systems. Let's briefly focus on this moral dimension of free market systems.