by it comes down to a fundamental failure to understand capitalism and its role in human well-being
So what is capitalism? Why is it not the cause of today’s ills but rather, a cure?
Capitalism is not the mixed economy prevailing in most western countries, including the United States. As defined by Ayn Rand, capitalism is “a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.” Such a system does not exist today, but was most closely approximated America in the 19th century, after its founding on the principle of individual rights. Some Asian countries today also have systems resembling capitalism. Most notable is Hong Kong, before the recent restrictions of freedom there by the Chinese communist regime.
Capitalism is a system of freedom, protected by the individual rights to life, liberty, property, and the pursuit of happiness. Each individual can live their lives and pursue their goals as they see fit, without interference from government or others. Individuals’ freedom is bound by one condition: they cannot violate the rights of others. In other words, they cannot initiate physical force or fraud; they can only deal with others through persuasion and trade.
In capitalism, it is the role of government to protect individuals’ freedom against force and fraud. This it can do relatively simply, by operating the armed forces, the police, and the law courts. No “inordinate number of expensive regulations” that my colleague was envisioning, are needed.
Capitalism can hardly be blamed for climate change. The climate is always changing from natural causes, and the widest fluctuations happened before humans appeared on the planet, and much before the Industrial Revolution. If anything, the wealth created by the relatively free markets and the technologies it has enabled, help protect us against dangerous climate, including the portion of the changes that are attributable to human activity.
As for trade wars, they are not a feature of capitalism. They are initiated by governments, which under capitalism do not have a role in the economy and do not create trade or any other policies. Government’s only role under capitalism is to protect freedom of individuals, including the freedom of trade.
Capitalism is also a system of competition. It allows individuals to pursue whatever goals they set for themselves, striving to do their best to produce values—goods and services—that others would want to trade with them. Due to volition and differences in capability, some will be more productive than others and will create more wealth, leading to inequality.
But inequality is not an ill, as capitalism’s critics claim. We all benefit from higher productivity of others, in the form of better and more affordable products and services and more job opportunities. Even the very small fraction of people who cannot produce at all due to disability, benefit from others’ productivity, through private charity that wealth makes possible.
Capitalism is truly the pro-human social system superior to its alternatives. Those who recognize (or should recognize) this—such as the Roundtable CEOs, business school professors, and anyone who values prosperity over poverty—should take the moral high ground and defend capitalism, instead of appeasing its critics and perpetuating the myth that freedom and wealth creation are not necessary to human flourishing.
Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada. She has lectured and conducted seminars on business ethics to undergraduate, MBA and Executive MBA students, and to various corporate audiences for over 20 years both in Canada and abroad. Before earning her Ph.D. from the Wharton School of Business, University of Pennsylvania, she helped turn around a small business in Finland and worked for a consulting firm in Canada. Jaana’s research on technological change and innovation, value creation by business, executive decision-making, and business ethics has been published in various academic and professional journals and books. “How to Be Profitable and Moral” is her first solo-authored book.
