What's the Moral Case for Capitalism?
Economist James Pethokoukis at the American Enterprise Institute writes:
But it may not be enough to point out liberal democratic capitalism and creative destruction create a wealthier, healthier, and more interesting society. I mean, that should be enough. Maybe not, however. What about the “moral” case for capitalism and the economic growth it generates like no other system ever devised or imagined? Does capitalism make a better society in non-material aspects? Harvard University economist Benjamin Friedman made a powerful affirmative case that it did in his 2005 book, “The Moral Consequences of Economic Growth.”
So far so good. Then Pethokoukis quotes Benjamin Friedman:
The experience of many countries suggests that when a society experiences rising standards of living, broadly distributed across the population at large, it is also likely to make progress along a variety of dimensions that are the very essence of what a free, open, democratic society is all about: openness of opportunity for economic and social advancement; tolerance toward recognizably distinct racial, or religious, or ethnic groups within the society, including new immigrants if the country regularly receives in-migration; a sense of fairness in the provision made for those in the society who, whether on account of limited opportunities, or lesser human endowments, or even just poor luck in the labor market, fall too far below the prevailing public standard of material well-being; genuinely contested elections that determine who controls the levers of political power; and democratic political rights and civil liberties more generally. Conversely, experience also suggests that when a society is stagnating economically—worse yet, if it is suffering a pervasive decline in living standards—it is not only likely to make little if any progress in these social, political, and (in the eighteenth-century sense) moral dimensions; all too often, it will undergo a period of rigidification and retrenchment, sometimes with catastrophic consequences.
Most of these are good. But Friedman seems to be implying that rising standards of living lead to a bigger welfare state, and that that’s good. I’m not the only one who thinks Friedman is saying that. Pethokokuis thinks so too. Pethokokuis writes:
It’s an appealing intuition that Friedman supports through a political and economic analysis of US and Western European history. For example: The Great Society was passed in the Go-Go 1960s, while the economic volatility of the 1970s was followed by a decline in public support for welfare programs and immigration.
The Great Society was a substantial increase in the welfare state and, therefore, a substantial decline in economic freedom, which includes people’s freedom to choose how to allocate their resources.
So the moral case for capitalism, according to Friedman and Pethokokuis, is that it leads to greater wealth, which leads to bigger government and, in some areas, less freedom.
I don’t think that’s a good moral case for capitalism. It’s contradictory. More capitalism should mean less government control over resources, not more.
But is there a moral case for capitalism? Yes, there is. The moral case for capitalism is that it lets each person make his/her own choices about how to live: what work to engage in, what to spend money on, whom to associate with, how to arrange his/her private property, what substances to ingest in his/her body, and how to spend his/her leisure time, to name six.
HT2 Don Boudreaux.