Morality in a Capitalist Economy

Ayn Rand said that “the United States of America is the greatest, the noblest and, in its original founding principles, the only moral country in the history of the world.”  Why did she say “moral”?  Because the original system of the United States was capitalism, “a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.”  One of those individual rights is the right to pursue one’s own happiness.  But many people think acting in one’s self-interest conflicts with acting morally.

Evonomics.com, a progressive website biased against capitalism, has a discussion in an article about the role of morality in a capitalist economy.  Peter Turchin states, “The main question is whether economic agents, most importantly businessmen (including both corporation officers and business owners), should be motivated solely by self-interest, or should they also be motivated by personal ethics.”

There is no dichotomy between being motivated by personal ethics or a rational self-interest.  It is always in one’s best self-interest to be ethical.  It may seem to some as though being deceptive in order to get something is in one’s self-interest, but one always has to consider the long-range consequences of one’s actions.  If someone cheats at a game in order to win, he knows that he didn’t really win.  If someone lies in order to gain sales for his product, he knows that he doesn’t deserve the sales.  Gaining, or trying to gain, what is not deserved is self-destructive.  It harms one’s self-worth because deep down one knows the truth — that one is not worthy of the win. This does not bode well for inner self-confidence and happiness.  How is being unethical in one’s best self-interest?

What about the people who do not act in their rational self-interest and are unethical?  It is the system of capitalism that corrects corruption due to actions of a free market that offers other choices. Once it is discovered that a businessman is dishonest, he loses business because the customers go elsewhere. Anyone who harms the individual rights of others through the use of force or fraud can be taken to a court of law for restitution or some form of justice.  But with socialism, the government controls all economic activity, so citizens are stuck with the corruption.  Actually, corruption grows and becomes the standard within socialism, as well as in a mixed economy, because decisions are taken out of the marketplace and reside solely within the political realm.

It may seem as if it is in one’s self-interest to buy off politicians in order to get laws passed that give one an edge over one’s competition, but this is not moral, nor is it rational.  People who do this are not really businessmen, they are swindlers.  Swindlers know that they cheated and that they have attained what they don’t deserve.  They have essentially committed a form of theft against their competitors and customers, and they have the constant stress that someone else could do the same thing to them.  Another negative result is that swindlers become dependent on politicians to keep the game going — they become dependent on politicians to grant them additional favors so they can stay in business.  A solution for this problem is to get rid of the mixed economy.  In a truly laissez-faire capitalistic society, a full separation between economics and state would predominantly prevent swindlers from using money to seek power by manipulating politics.

But aren’t businessmen greedy and isn’t greed immoral? Money is a medium of exchange, provides security, and there is nothing wrong with a desire to honestly earn more of it.  Who is it that determines if someone has excessive greed? Why is the person who works honestly for his money and wants more considered greedy, but the politician who demands money from him not considered greedy?

Whether greed is good or bad depends on the context.  If someone is greedy for something negative like drinking alcohol to excess, the result will most likely be negative.  He could become an alcoholic or abusive.  If someone is greedy for something positive such as the spouse of his dreams, the result will most likely be positive.  He could have a happy marriage.  Any successful entrepreneur is consumed with greed, but his greed is for his work.  He is primarily motivated by doing a good job; the money is secondary.

Morality and a rational self-interest are not incompatible.  In order to survive, human beings need the freedom to work and keep the fruits of their labor.  True capitalism (i.e. without government interference such as bailouts, regulations, favors, and backroom deals) provides the freedom for businessmen to produce, but they have to do it honestly, otherwise they will not be successful.  If successful, the capitalist earns material wealth.  Production leads to prosperity and everyone benefits from prosperity — a hallmark of capitalism.

Originally published in The American Thinker.