THE FORGOTTEN MORAL UNDERPINNINGS OF CAPITALISM

It is hard for even the most apolitical American to be oblivious to the political discourse going on in our country. Underlying the tsunami of emotions sweeping through the political landscape, one senses deep and wide-spread anger. One source of anger stems from the perception that the “system” is stacked in favor of “the few”.

As Americans we love competition, but we do so expecting that the rules of the game apply equally to all players and that everyone has a fair and open chance to win. However, as we witness the unimaginable prosperity levels of a very thin slice of our society and contrast it with the stark outlook for the rest of us it becomes tempting to castigate the “system”. Our collective anger while justifiable is however misplaced. Worse, it may lead us to make some wrong and hugely damaging choices.

The failures of a system can frequently be traced to some element of human error in the design, construction or use stages. With capitalism, the human “error” stems largely, in my opinion, from the fact that we have effectively untethered it from its moral underpinnings.

In talking about free market capitalism (a concept that exists fully only in theory by the way) everyone refers to Adam Smith and his famed “Wealth of Nations”. However, what is not widely known or mentioned is the fact that Adam Smith came to his economic theory through the realm of moral philosophy. He laid out his moral and philosophical principles in a lesser known book called The Theory of Moral Sentiments.

Contrary to how his economic views have been expropriated to justify some kind of ethically neutral and intervention free system, he was extremely aware of the ethical pitfalls associated with unregulated mercantilism.

• He was passionate about injecting fairness into the system through a transparent set of institutional arrangements that would ensure a free and just economic system. He saw an important role for the regulators.
• In the marketplace of free and voluntary transactions, and private property rights, he saw gains going to all parties involved so as to ensure certain acceptable standards of living.
• Freedom would be self-regulated through the exercise of individual prudence and benevolence and a commitment to justice (not to be confused with the currently fashionable term “social justice”). For him justice meant the equal application of law regardless of social status.

Think about how far we have drifted from Adam Smith’s noble and uplifting model of capitalism built on a foundation of moral principles. He would be shocked at the cozy relationships between the regulators and the regulated, the lack of transparency, the selective application of the law, the endless constraints on voluntary transactions under the guise of achieving some ephemeral greater good, and the self-absorbed and highly consumptive materialism.

The solution to this malaise is not to opt for other political systems which only deliver a Faustian bargain – trade freedom for chimerical prosperity. As a helpful hint to those who want to view Scandinavian or Euro Socialism as a panacea I would refer you to the published work of Nima Sanandaji. The fact remains that a morally based free market capitalist system delivers the goods, when viewed over the long term. As participants in such a system, we have the responsibility to ensure that we live up to all of its pre-requisities even as we enjoy its unparalleled benefits.