September 10, 2014

Capitalism: The System Built on Greed?

By In Articles, Economics

The anti-free market proclamations from the left (and sometimes even the right) come in all shapes and sizes.  Among the more common of these proclamations is the one that I heard recently.  As far as I can remember, this is what was said by the individual (to her friend) next to me.  “Capitalism is problematic because it is an entire system based on greed.  If we want a healthy society, we should not seek to adopt such a system.  We need a system that is based on cooperation and love.”  That capitalism is a system built on greed is a claim that is often heard and the theme has been pushed at every level of society; from the politicians, the educators, the commentators, the media, and the average Joe.

It is immediately clear that there is a dichotomy here between cooperation and capitalism, a dichotomy that should immediately raise the red flags of the libertarian.  After all, aren’t we always saying that the economy is most ethical when it is completely voluntary?  And does not voluntary interaction and exchange form the basis for capitalism?  The problem sits in the misunderstanding of the very nature of (free market) capitalism.  This capitalism is not the same as the fascist system we have today.  The American system of corporatism, that has largely existed since the nineteenth century, should never be confused with the free market.

Free market capitalism, we ought to point out, is not so much a “system that we seek to adopt,” so much as it is the summary statement of thousands, perhaps millions, of individuals interacting with one another and trading with each other on the basis of cooperation.  Rather than thinking of it like a system, implying that it was designed by The Very Scary Wealthy, we should think of it as countless individual exchanges between people with wants and needs that coincide with the wants and needs of others.  That the market is simply a conglomeration of individuals acting means that it is spontaneous and that it arises only when the individuals consent to participate.  Whether or not one can say that love is involved, at the very least we should maintain that cooperation is a feature of the market without which there is no economy.

Moreover, the nature of this cooperation is that it is voluntary.  If cooperation simply refers to a “working together,” then it is clear that there is cooperation that is forced on the participant and there is cooperation that is volunteered by the participant.  If an economy is to exist at all, it must include many individuals.  Therefore cooperation is necessary.  The question is, however, whether this cooperation will be forced or not.  Capitalism is the one system that advocates cooperation by consent.  And any other system, which would require cooperation by coercion, could not honestly be promoted as based on “love.”  Therefore, we conclude that capitalism is based on voluntary cooperation that would hopefully include love while any other system is based on coercive cooperation that cannot include love.

When we speak of the voluntary exchanges that individuals make with each other, we are referring to the fact that one person in the exchange wants what the other has more than what he himself has.  And this is also true of the other participant.  In fact, it is an a priori truism, as Mises pointed out.  When one individual voluntarily gives up what he has, to gain what he wants, this is an indication that his preferences are with the good that he is receiving.  In other words, the individual has determined that the good he is aiming to get is more valuable than the good (perhaps money) that he already has.  The shopper prefers milk more than his $4.00 and he is thus willing to make an exchange.  The individual selling the milk prefers the $4.00 more than the milk he is selling.  What does all this tell us?  Some might say that it says individuals are self-interested, that is, they are seeking to benefit themselves.  This is very true.  But what is not often said is that these individuals can only benefit by first meeting the needs of others!  Now, love is a volition, a commitment to the well-being of another person, but surely this interaction is closer to love than one wherein the giver is forced, by threat of violence, to participate in the first place.  Since love is a voluntary act of the will, capitalism allows for love while any deviance from a free exchange interferes with the opportunity to love.  If a free exchange is prevented, love is not allowed to be applied; if an exchanged is forced and not free, it cannot by definition be loving.  How can an activity be said to be loving if coercion is driving the activity?

Moving on from cooperation and love, we face the more common claim that capitalism is a system built on greed.  This, of course, is a fantastic sound bite, but unfortunately it says very little.  How is greed defined here?  Does the statement aim to say that individuals are acting based on self-interest?  Or does it mean that greed –wanting more than one actually needs– is what drives the “system” forward?  And who is greedy?  The person buying food?  Or the person willing to sell it to him when he is hungry?

What is more interesting is the fact that we are not told how any other “system” is going to cure man of his natural “greedy disposition,” assuming that it exists in the same way in every person.  Are we to believe that, once in political office –that is, once in a place where coercion is legally authorized –the greed simply disappears?  And if it does not disappear, where are the indications that the greed will not be abused?  For in the free market, greed can only be profited from by first meeting the needs of others in society.  In other words, the more greedy the capitalist, the more he must provide goods and services for his neighbors.  It would seem, then, that capitalism, while not alleviating greed, has the ability to harness it and use it for the benefit of others.  Something that cannot be said of the gun-weilding State, with the full force of its own artificial law behind it.  The difference between the greedy CEO and the greedy politician is that only one can write laws which authorize coercion intended to satisfy his greed.  (Of course, we are for the moment not considering the moral hazard that arises with the State in which the CEO can also participate in the legislative process– but this is not a function of the free market).

Do we deny that capitalism is a system based on greed?  Indeed we do.  For greed is something that only a portion of the population struggles with.   But there are other portions of the population that struggle with other sins.  Because of the rise of the pornography industry, perhaps we should say that capitalism is based on lust.  Or what about the fast food industry?  Can we say that the economy is based on gluttony?  As a final example, perhaps we should assert, after studying the personality of the wealthiest leaders of industry, that capitalism is a system built on pride.  As can be seen, and as known since the writing of the Old Testament, individuals are full of sin, and it is idolatry to assume that man can concoct a political system that has the ability to remove that sin.

Capitalism cannot be a system “built on greed” because it does not require that people be greedy in order to function.  What it actually depends on is voluntary cooperation and a coincidence of wants.  Some may use the market to fuel greed and other may use the market to fuel their sexual immorality.  But the market also fuels things like missions, feeding the poor, building prosperity to raise the living standards of everybody, and widespread literacy.  And more importantly, the market fuels all these things without threat of violence.  We cannot define capitalism by the moral failures of the few.

That free exchange must be prevented because of greed also points to the curious want by the Statists to control the morality of others in society.  While as libertarians we oppose government interfering in activities that are sinful unless the activity involves breaches the non-agression principle, it is obvious that the “greed-hawks” want to stomp down on those without the proper motivation for doing things.  One gets an eerie feeling when he realizes that these Statists have as their goal to enforce the approved motivations that drive people and to punish based on the intentions of one’s heart.  Are not these folks who want to eradicate “greed” by force the ultimate totalitarians?

In conclusion, we make three points: Firstly, we say that it is absurd to say that capitalism exclusively is a system built on greed when any other government-created system also includes the same amount of greed.  Second, we say that in capitalism, if an individual is greedy, that greed can only be satisfied by helping out others.  Greed, while sinful, is handicapped by the competing desires of others.  Third, we say that greed should not be, but often is, confused with self-interest.  Self-interest is the reason why one drinks apple juice and not motor oil for breakfast.  Self-interest is the reason that one tries not to walk around the house running his toes into tables and chairs.  If we personally take joy in the satisfaction of others, is this not a noble reason to seek others’ benefit?  Greed is something far different and only God can deal with the greedy heart.  Why must the State, as usual, seek to play the role of God?

Written by C.Jay Engel

Editor and creator of The Reformed Libertarian. Living in Northern California with his wife, he writes on everything from politics to theology and from culture to economic theory. You can send an email to reformedlibertarian@gmail.com