The Morality of Capitalism: Liberty, Honesty and Humility

First Published: 2015-03-08

In American culture there is one persistent villain portrayed as the enemy of humanity, the perpetrator of deception, and the agent for social corruption and human harm: the businessman.

Whether in news commentaries or on the movie screen, the businessman is presented as a heartless, greedy manipulator so concerned with squeezing the last possible dollar out of anything he does, that he is willing to destroy the planet, kill his competitors, poison little children, and sell his own mother “down the river” if it will serve his material and financial purposes.

The only thing that saves us from the end of the world at the hands of these criminal private enterprisers is either some righteous individual who refuses to “take it any more” or the virtuous hand of a government agent dedicated to protecting mankind from those who, clearly, care nothing for the common good of humanity.

Critics of Capitalism Want to Abolish or Regulate It

This imagery of the businessman’s way of gaining profits has been extended by many intellectuals, academics, and public policy pundits into a general criticism and, indeed, condemnation of capitalism.

What can be praiseworthy, ethical or just in a social and economic system that fosters people to focus only on their self-centered personal interest in the pursuit of material gain with little or no thought to the betterment and improvement of mankind?

The conclusion that many of these critics have reached over the years and decades is that the entire capitalist system must be done away with and replaced with an alternative social and economic system such as socialism; or, at a minimum, business enterprise has to be placed under the detailed supervision and regulatory hand of government bureaucrats presumed to be concerned with and devoted to the general welfare of the country as a whole instead of individual private interest.

I beg to differ from this interpretation of businessmen and the free enterprise system in general. Instead, I would argue that a truly free enterprise, competitive capitalism is the most moral and humanely beneficial way for people to live together that has ever been stumbled upon by mankind.

Capitalism’s Premise: Individual Rights and Liberty

There are basically two way human beings can interact and associate with each other: through the threat or use of force or by mutual agreement and voluntary consent.

When have you ever walked into a shoe store looked around and, maybe, tried on a pair of shoes, but when you decided to leave without buying anything a gruff and intimidating character with a club or a gun said, “The boss says you ain’t leaving without buying something”? I doubt it any of us have had any such experience.

Why? Because the philosophical and moral premise underlying transactions in the marketplace is that each participant has the right to say, “Yes” or “No” to an offer and an exchange.

Why does every person have this implied right to “Yes” or “No” without attempted physical intimidation or use of force to make him act against his will? This is due to the fact that the foundational American principle is that every one of us has an inviolable individual right to their life, liberty, and honestly acquired property.

Virtually every other philosophical and political system throughout human history has been based on some version of the opposite. That is, that you do not own yourself; your life and property are at the disposal of the primitive tribe or the medieval king, or the social, national, or racial group or “democratic” community to which you’ve been designated as belonging.

That is the premise of all forms of political and economic collectivism. You work for the group, you obey the group, and you live and die for the group. The political authority claiming to speak and act for the group presumes to have the right to compel your acquiescence and obedience to the asserted needs and desires of that collective group.

Only liberal, free market capitalism as it developed in parts of the Western world, and especially in the United States, broke free of this age-old collectivist conception of the relationship between the individual and others in society.

The modern ideas of individual liberty and free enterprise that began to develop and be argued for about 350 years ago transformed the way men lived and earned a living, and the ethical premises underlying human association in society.

A new morality emerged under which human relationships became based on mutual consent and voluntary agreement. Men could attempt to persuade each other to associate and trade, but they could not be compelled and plundered so one person could get what he wanted from another without their consent.

For Americans, it is heralded as the fundamental principle under which our country was based: It is held to be a self-evident truth that all men are created equal and endowed with certain unalienable rights among which are their individual rights to life, liberty and the pursuit of happiness.

Capitalism Fosters Honesty and Good Manners

As a consequence of this principle of liberty, in the marketplace of the free society individuals learn and practice the etiquette and manners of respect, politeness, honesty and tolerance. This naturally follows from the fact that if violence is ethically and legally abolished, or at least minimized, in all human relationships, then the only way any of us can get others to do things we would like them to do for us is through reason, argument, and persuasion.

The reason why the shoe salesman is motivated to act with courtesy and deference toward us when we are in his store is precisely because he cannot force on us to buy a pair of the shoes he wants to sell. We can walk down the mall corridor and buy those shoes from another seller interested in winning our business, or we can just go home without buying anything that day.

The clichés of “serve with a smile,” or “the customer is always right,” in fact are inescapable resulting manifestations of the voluntarist principle at the basis of all market transactions.

No businessman is likely to keep his market share or even stay in business in the long run if he earns a reputation for rudeness, deception and dishonesty in his dealings with either other businesses or his consumer customers.

The famous Scottish economist of the 18th century, Adam Smith, long ago explained that the motivation for respectful, polite, honest and deferential behavior on the part of any businessman is his own self-interest. If he does not, he may not long remain in business, as every private enterpriser knows who had learned to appreciate the importance of gaining and maintaining his brand-name and personal reputation in the eyes of all those with whom he has dealings.

Such polite, courteous, honest and deferential behavior may start out as the self-interested conscious and intentional attempt to merely succeed in the market pursuit of profits, when voluntary and free market dealings and transactions become the common and everyday way in which people associate.

But, over time, such rules of “good behavior” become habituated, a part of the routine of regular day-in and day-out interactions, until, finally, they are transformed into the customs and traditions expected in any and all human encounters, whether in the marketplace or not.

Thus, the practice of self-interested good manners and respectful tolerance fostered first in commercial buying and selling become embedded and reinforced as the general societal rules and ways of civilized and “polite society.” And, thus, capitalist conduct makes its contribution to a more cultured and humane civilization.

Capitalism Creates a Spirit of Humility, Not Political Arrogance

Finally, I would suggest that free market capitalism also inculcates a spirit and attitude of humility. In the open and competitive marketplace, anyone who has an idea or a dream is free, in principle, to try to bring it into reality. No private person or political power has the right or authority to prevent him from entering the field of enterprise and trade to discover if his idea or dream can profitability be brought to fruition.

The capitalist “rule of the game” is that anyone is at liberty to enter the arena of enterprise if he has the will, determination and drive to attempt to make that new product, that better product, that less expensive product. This implicitly takes for granted as an underlying assumption that no one, not any of us, has the knowledge, wisdom and ability to know beforehand whose ideas and efforts can turn out to be a success rather than a failure.

The Austrian economist and Nobel Prize-winner, F. A. Hayek, once referred to competition as a “discovery procedure.” If we knew ahead of time who in a marathon, for example, would come in first, second, third and so forth, as well as the actual relative times of the runners, what would be the purpose of running the foot race?

Even when we have the track record of previous marathons, and think we know something about the relative strengths and weaknesses of the competitors looking ahead to a future race, the fact is we do not know how the race will actually play out, until the runners finish the course.

The humility of the marketplace, no matter how strongly confident the individual businessmen may be in their own ideas and abilities, is that no one – neither an private individual nor even the most well-informed government bureaucrat – has sufficient knowledge and forethought to successfully “pick winners” and “avoid losers” for the good of society as a whole.

This can only be found out through the competitive rivalry of the private enterprisers who are each trying to make the product or supply the service that will gain the business of customers, as found out from whose products or services the buying public actually decide are the ones that best fulfill their existing or discovered needs, desires and wants.

Capitalism’s Moral and Virtuous Watchwords

The watchwords of capitalist free market morality, therefore, are liberty, honesty and humility. The freedom of each individual to live and choose for himself; the ethics of fair dealing – that is, human relationships on the basis of force and fraud are banned in all their forms; and the modesty to admit and accept that none of us is wise enough to arrogantly claim the right to plan and coercively direct others in society.

Not only would it be morally wrong to presume to tell others how best to live by reducing them to the status of commanded followers of our own ideas and desires, it would limit what all mankind can accomplish to what the government central planner or regulator can imagine and know within the limits of his own mind’s possibilities for understanding all that there is to know.

How much better, both for the individual and all the rest of us, to leave everyone at liberty to think, imagine, and act as they consider most profitably best for themselves, so all in society can, also, benefit from what a human mind can creatively conceive that others may not.

We live at a time in which real-world capitalism is hampered and stymied in almost every direction by the heavy hand of government regulation, control, restriction, prohibition and taxation. It is politically managed and manipulated capitalism, and very far, therefore, from the truly free market capitalism that I have outlined in terms of its moral premises and social virtues.

It is certainly not the twisted conception of “capitalism” that is presented in the media and the movies. Real free market capitalism, by recognizing and respecting the right of the individual to his own life and liberty and honestly acquired property, is that economic system that offers humanity the most moral system of human association imaginable by and for man.

Free market capitalism is the ethical highroad to human dignity and mutual prosperity – if only we are willing to fully establish and consistently practice it.

(The text is based on a talk given at the James Island Exchange Club in the Charleston, South Carolina area, February 9, 2015)

First published at EPICTiMes, and posted here with the kind permission of the author


Dr. Richard M. Ebeling is the BB & T Professor of Ethics and Free Enterprise Leadership at The Citadel in Charleston, South Carolina, He was formerly professor of Economics at Northwood University. Was formerly president of The Foundation for Economic Education (FEE), was the Ludwig von Mises Professor of Economics at Hillsdale College in Hillsdale, Michigan, and served as president of academic affairs for The Future of Freedom Foundation (FFF).

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