by Daren Bakst
Senior Research Fellow in Agricultural Policy, Heritage Foundation
RALEIGH — The "Occupy" movement has brought about some recent discussion regarding the merits of capitalism, but its anti-capitalist arguments are nothing new. The protesters aren’t the first to characterize capitalism as a greedy and immoral economic system that benefits only the wealthy.
It’s an unfortunate reality that some Americans forget why capitalism isn’t just important to our economic well-being, but also to our freedom. Capitalism embodies and is an extension of the morals and values that exist in the Constitution and that still exist in our society today. There are many reasons why capitalism is moral. I’ll discuss three.
Before listing the reasons, it’s useful to define, at least broadly, what I mean by capitalism. "Capitalism" is an economic system in which the means of production are privately owned, and titles and rights to that private property are freely and voluntarily exchangeable.
First, capitalism is moral because — unlike socialism — it respects individuals, their rights, and their pursuit of happiness. In fact, capitalism requires this respect for individuals and rights. This is why capitalism often is defined as a social system, not an economic system, which protects individual rights.
Parents often tell their children that they can be whatever they want to be when they grow up. While all children won’t grow up to be architects or doctors, they have the opportunity in a capitalist system to achieve those goals. The same can’t be said in socialist systems.
There’s a reason why it is called the American dream and why immigrants from all over the world come here to seek that dream. They have the chance, not the guarantee, to improve their lives. Inequality in outcome shouldn’t be misconstrued as a weakness of capitalism. There’s equality in opportunity. We all may not get to the same finish line, but we all can run the race.
When it comes to individual rights, capitalism helps to preserve them, while many rights are incompatible with a socialist system. For example, there are no fundamental guarantees of property rights in a socialist system. This means individuals can’t start their own businesses, own their own homes, or necessarily choose their own occupation. How can people freely choose an occupation when all production and resource allocation decisions are made by the state? There’s nothing they ever can call their own.
Second, capitalism is moral because it is pro-consumer. When anti-capitalists hear the term "competition," they think it is a cruel process that hurts those who don’t have the resources or ability to survive. This isn’t cruel, though. Only through competition do we provide the numerous benefits to consumers.
Competition drives down prices and forces competitors in the marketplace to innovate and improve their goods or services constantly. For those who can’t keep prices down or offer a better good or service, survival isn’t possible.
Low-income individuals are able to enjoy goods and services that wouldn’t be available to even upper-income individuals in socialist societies. Nothing captures the difference between capitalism and socialism like a trip to the grocery store.
Going to the grocery store and having an endless amount of options is in many ways taken for granted in the United States. In the Soviet Union, citizens had difficulty finding even the basic necessities, such as toilet paper and butter.
While capitalism brings competition and the many benefits that it provides consumers, socialism brings central planning, shortages and poor products. There’s nothing moral about a select few elites in a centrally planned economy having the arrogance to believe that planning can mimic the complexity of a free market.
Third, capitalism is moral because it generates wealth. This wealth generates jobs, improved quality of life, a cleaner environment, and much more. When businesses are able to make profits, they can create jobs and reinvest the profits into goods and services that could have valuable societal benefits.
Wealth generation doesn’t simply encompass wealth for the wealthy. It encompasses wealth for everyone and generally means that as a nation we have a higher standard of living. Those with low incomes have the chance to get better job opportunities.
The wealthiest nations have better infrastructure, stronger buildings, safer drinking water, and other critical benefits compared to poor nations. There’s significant research that indicates wealthy nations also are better stewards of the environment.
All of these benefits help society as a whole. There’s a misconception that capitalism benefits only individuals and businesses and, therefore, serves no benefit to the society as a whole. However, individuals and businesses are society. Through a capitalist system, even when individuals act in their self-interest, their actions will benefit society.
There’s no need to defend capitalism, although, unfortunately, there seems to be a need to remind Americans why capitalism is moral. It’s the economic system that respects individuals and individual rights. It’s the economic system that’s pro-consumer and makes it possible for goods and services to be affordable to people at even the lowest income levels. It’s the economic system that generates the most wealth and improves the standard of living for all citizens. Socialism is none of those things.