After we covered the main moral codes–altruism, egoism, and cynical exploitation–in my MBA business ethics course, my students report that they are all egoists (I do tell them that egoism isn’t automatic but requires knowledge of what constitutes one’ self-interest). That isn’t surprising, given that egoism is a common sense morality: pursuing one’s self-interest without exploiting other people is what survival and flourishing requires. We haven’t discussed social systems yet, but one student said: “I like egoism, but why does it align with capitalism? I want social justice, so I am happy to pay taxes for public education and healthcare.”

What makes this student, and many other people, dislike capitalism even while claiming that they advocate the pursuit of self-interest? I think there are two primary reasons: 1) a lack of understanding of capitalism, and 2) a failure to integrate capitalism with the requirements of self-interest. Let’s discuss each in turn.

Capitalism is often confused with the mixed economies prevalent in most of the world today, and business schools do not do a good job of educating their students about capitalism. However, the lack of understanding of capitalism is relatively easy to correct. There are several books that explain capitalism, from Ayn Rand’s Capitalism: The Unknown Ideal to Andrew Bernstein’s The Capitalist Manifesto and Capitalist Solutions to Yaron Brook and Don Watkins’ Free Market Revolution. These works are available to anyone who wants to understand what capitalism is. (Of course, those averse to capitalism may not pick up any of them).

In Ayn Rand’s definition, 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 under capitalism the rich cannot exploit the poor, nor can the poor claim “need” and ask the government to give them some of the wealth of the rich. People are free to trade with each other and do whatever they want with their own property (spend it, invest it, give it away), and no-one can initiate physical force. The government’s only role is to protect individual rights against the initiation of physical force (through the police, the military, and the courts).

Presumably my student and others who prefer the welfare state over capitalism believe that those who are poor or otherwise less fortunate would be better off in a welfare state with “redistribution” of income from those who are more productive to government spending on education, healthcare, and other programs. But is that really true? Consider two systems: our current welfare state and a capitalist system where producers are free to produce and trade to the best of their ability and keep the rewards of their production. In which system would the poor—and everyone else—be better off? The one in which producers are demotivated and penalized for their productive efforts by highly progressive income taxes, or the one in which wealth creation is maximized through the freedom of producers, protected by government?

Understanding capitalism and how it benefits everyone, including the poor, is the first requirement of alleviating aversion to it. But people also need to recognize that the pursuit of self-interest and capitalism are integrated. This is hard because most people are not integrative thinkers but view ideas in isolated compartments. My student who claims to like egoism but not capitalism fails to recognize the single social requirement of pursuing self-interest: freedom. Capitalism is the only social system that protects people’s freedom (individual rights) and bans the initiation of physical force. To pursue self-interest, people must be free to think and act on their thinking—without violating the rights of others. If the government has the right to take income from those who are more productive to “redistribute” to those who are less productive in the form of various social programs of its choice, the producers’ freedom is limited. The ability of the more productive to pursue their self-interest is severely curtailed in such a welfare state.

The philosophical foundation of the welfare state is not egoism but altruism: the moral code of self-sacrifice for the sake of others. If you find yourself liking egoism but not capitalism, you need to check your premises. Egoism is the moral requirement of capitalism, and capitalism is the social requirement of egoism. Without capitalism, our ability to pursue self-interest is limited. If we want to not only survive but to flourish, we should embrace capitalism, not reject it.

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Jaana Woiceshyn
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. Visit her website at profitableandmoral.com.

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