During a recent visit to Finland, I watched a wide-ranging TV interview of a retired British-born Finnish writer and theater director. When asked about his politics, the writer said he is a leftist because he worries about capitalism destroying the planet – and that we should therefore end it. That comment prompted this post.
Animosity towards capitalism is common and nothing new. Capitalism is, and has been, blamed for various ills, from poverty and income inequality to pollution, inflation, child labor, and war. But the writer’s pronouncement was still (somewhat) surprising, given his degree in philosophy from Cambridge University (in the 1970s) and obvious intelligence. No wonder capitalism is misunderstood and falsely accused when an intelligent, deep thinker also gets it wrong despite the undeniable factual evidence of the benefits of capitalism.
Capitalism is misunderstood because it is often confused with today’s mixed economy that combines varying degrees of economic freedom and statism. Statism gives the government unlimited power that it uses to tax, regulate, and subsidize individuals and businesses and to hand out favors (government contracts, lower tax rates, subsidies) to companies that make political contributions and do the government’s bidding.
Because of this confusion, people blame capitalism for problems caused by the mixed economy and statism in particular. Consider poverty and income equality. Poverty is most persistent in countries where the government deters wealth creation through high levels of market controls, taxation, and corruption that constrain economic growth, entrepreneurship, job opportunities, and people’s ability to work themselves out of poverty and improve their incomes. The same can be said of child labor (a consequence of poverty), inflation (caused by government manipulation of the money supply, not by business seeking to maximize profits in a free market), and war (caused by government invasion of another country).
Capitalism does not cause the problems it is blamed for but provides solutions by safeguarding freedom. Whereas in the mixed economy the government’s power continually increases and limits freedom (witness Canada in the last 10+ years), capitalism rejects statism and protects individuals’ freedom to think and act in their rational self-interest: to produce and trade, which increases human wellbeing.
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.” In such a system, the government’s role is limited to protecting individual freedom. It does this by deterring and punishing the initiation of physical force against others, which leaves people free to interact and trade. All physical coercion and the threat of it, as well as fraud, is banned. Under capitalism, the only way to get others to collaborate is through persuasion and voluntary trade.
Although pure laissez-faire capitalism has never fully existed, for the lack of a proper moral philosophy to defend it, some historical periods and countries have approximated capitalism when their elements of freedom have been the greatest and the statist elements the smallest. These periods and countries testify to the impact of freedom – that capitalism institutionalizes – on human flourishing and prosperity. Some examples: America during the 19th century (the longest uninterrupted period of peace); England, France, and other European countries during the Enlightenment (that brought about the Industrial Revolution); Hong Kong (before China’s takeover); and smaller countries like Estonia (that liberalized their economies after the collapse of the Soviet Union).
Capitalism is good for people and their environment because it produces and protects freedom, the social condition that human flourishing requires. It is freedom (and the protection against physical coercion by others) that unleashes the human mind to make scientific breakthroughs, to innovate and to produce the material values that support people’s wellbeing in all fields, from energy to labor-saving technologies to health care and beyond.
As Douglas Murray writes in his 2022 book, The War on the West, capitalism did not create today’s problems but has helped solve or reduce them. It has done so by creating wealth and freeing time for developing solutions. Ills such as poverty, child labor, child mortality, illiteracy, and pollution have all decreased significantly because of capitalism [or rather, because of the protection of individual rights such as liberty and property in the mostly free or semi-free countries]. Alex Epstein has also shown that capitalism and freedom have helped us innovate and adapt to climate change and develop affordable, reliable, and sustainable energy that shields us against climate-related and other environmental risks.
If we want human flourishing to increase, we must not reject and banish capitalism but embrace and defend it when the intellectuals, the media, and the politicians are attacking it. Capitalism can save us (and the planet) – if we let it.
