We have nothing to fear from capitalism and much to gain: the win-win situation of free trade with others, with flourishing for all, according to ability, effort and productivity.

My MBA students have been discussing alternative social systems as context of business in my business ethics class. While most see the value of capitalism, defined by Ayn Rand as “a social system based on the recognition of individual rights (including property rights) in which all property is privately owned,” many are reluctant to embrace it. The students recognize that individual rights and their protection by the government are important and that free market competition leads to better, cheaper products and services and more wealth being created.

However, they resist the idea of laissez-faire capitalism, because they are concerned about inequality, arguing that capitalism enriches only a few (“the one per cent”) while most people get poorer. The students also lament the lack of compassion for the less fortunate they believe capitalism leads to, without recognizing that compassion is choice they can make, not something that government can force. They favor the welfare state, where the government “takes care” of everyone by ‘redistributing’ wealth from the haves to the have-nots and attempts to manage the economy by ‘investing’ the tax payers’ money in infrastructure, innovation, winning industries, and a myriad of other initiatives.

It has always puzzled me why business students, and most other people, find capitalism so scary. After all, we have the accumulated evidence of the failures of socialism—counting over 100 million dead—from the former Soviet Union and its allies, China before the economic reforms, Cuba, and Venezuela today. Yet, my students and others want to maintain elements of socialism in a welfare state rather than adopt capitalism.

The following are some of the reasons why most people—even intelligent, ambitious business students—are afraid of capitalism:

  • A sense of duty to take care of others, and in turn, desire to be taken care of, based on the altruist idea permeating our culture that we are our brothers’ keepers. People find it comforting that the government—by collecting taxes from us—provides a ‘safety net’ for those who cannot look after themselves, including ourselves should some misfortune strike.
  • Inability to project alternatives to the current system. For most of us, government-run education and health care systems, private postal service, roads and utilities, or regulated business, are the given. Government has always provided “services” to us; they are our entitlements. If everything was privatized, nobody, except the rich, could afford education, health care, or even using the roads! If government didn’t regulate businesses, we would be killed or hurt by their products!
  • Lack of confidence in one’s ability survive and flourish—which means a lack of confidence in one’s ability to think and solve problems. This is a fundamental insecurity many people have, due to the inadequate education they have received in the government school system where they never learned to think independently and in principles.

However, the above reasons are not grounded in facts and can be countered by showing how capitalism, instead of benefitting a few, is the only social system that makes human flourishing possible for everybody. Under capitalism:

  • Every individual has the right to life, liberty, property, and the pursuit of their own happiness. Nobody can force us to be our brothers’ keepers. This means that we are responsible for ourselves and must finance our needs and desires by productive work and savings and insure against misfortune. The small fraction of people who cannot produce, will depend on private charity (which will flourish, absent government interference in the economy).
  • Privatization does not cause education, health care, and other services and products to be priced beyond people’s reach. Privatization leads to competition and profit seeking, providing many alternatives, with increased quality, lower costs, and lower prices. The evidence for this is overwhelming. Deregulation has a similar effect and does not lead to dangerous products.
  • There would be many private schools competing for students, accountable for their learning. Best curricula and teaching methods would win, and graduates would be able to think independently, integrate their knowledge, and apply it efficaciously to every problem they would encounter. This would give them the confidence in their minds’ ability to lead a successful life.

We have nothing to fear from capitalism and much to gain: the win-win situation of free trade with others, with flourishing for all, according to ability, effort and productivity. But to achieve it, we must reject the welfare state and its underlying altruist morality of sacrificing our own happiness for the sake of serving others’ needs.