A CASE FOR CAPITALISM
Contents:
Economics refers to the realm of human activity that concerns the creation and exchange of concrete values (a person’s concrete values are the concretes that a person acts to gain and/or keep). In other words, it concerns the creation and exchange of wealth in various forms, e.g. goods, services, assets, capital, money, etc. Hence, economics is one of the most important realms of activity within which a person concretises, i.e. realises or materialises his pursuit of value or — in more concrete terms — his pursuit of happiness.
Morally, an individual is an end in himself, i.e. his moral standard is his own life and his primary moral obligation is the pursuit of his own happiness. In order to create, use and — if needed — dispose of the values he needs to sustain his life, he must have the moral right to the concretes he needs to use to pursue his values and to the values he creates. A “right” in this context is a freedom of action that is morally sanctioned in a social context — note that a social context is relevant here, since no question of sanction is raised outside a social context (though morality is always relevant to an individual within or without a social context). The right to the resources for and result of one’s pursuit of value is the right to property.
It is important to note that, as all principles — which includes rights — the right to property is non-contradictory; you cannot accept the right to property without also accepting its necessary implications. Examples of such implications include: profit, inheritance, passive (i.e. non-productive) ownership, etc. Each of the implications deserves its own discussion, which I shall not get into right now. However, to set the stage for our next topic, consider an example in the case of profit. I posit that if a man owns the resources for an enterprise and wishes to buy the voluntary labour of other men for an agreed-upon price, the products of his enterprise — apart from what was agreed to be paid for the labour — are his by right, since it is the result of his resources and his pursuit of his values; in other words, he has the right to the profits of his enterprise apart from the cost of labour. As for the workers, their resources are their own labour and the material they do not own, while the result of their pursuit of value is the price for their labour that was agreed upon. However, given that “voluntary agreement” is given such importance, we must raise another question: what is the basis by which people must exchange values and where — if anywhere — does voluntary agreement come into the picture?
In broad terms, value-exchange refers to the transfer of concrete values from the possession of one individual to another. As such, value-exchange is not necessarily morally sanctioned, which means we must identify the conditions in which it is.
If an individual has the right to the resources for and results of his pursuit of value, no one else has the right to what is his other than what he chooses to give; his choice is the only basis by which others can have any right to what is his, since his property is only his to dispose of as he sees fit. The implication is that the conditions under which an individual agrees to give others the right to any part of his property is the relevant factor in deciding who has what rights regarding the results of the use of his property or former property.
The most direct example of value-exchange is trade, wherein each party agrees to give up his claim over some part of his property to the other in exchange for the claim over some part of the other’s property. A less direct example is that of employment, wherein one party agrees to lend his labour in exchange for a share (which may be a fixed amount or a proportion) of the results of the use of the other’s property. Here, we see the vital importance of agreement and — by extension — contracts; in the context of value-exchange, only the honouring of an agreement maintains one’s right to property. A contract is essentially an agreement enforced by law; such an enforcement is not a violation but in fact the only means to protect an individual against the violation of his property.
Hence, we see the rise of two key aspects of morally sanctioned value-exchange: (1) voluntary agreement and (2) the enforcement of contracts. The implication of voluntary agreement is free trade in every respect, from the exchange of goods and services to the exchange of voluntary labour for payment. The implication of the enforcement of contracts is that a key part of facilitating voluntary exchange is ensuring the respect for an agreement in the long-term. Of course, since the sole purpose of a contract is to safeguard the voluntary exchange of value, an agreement by all parties involved to change or cancel the contract must also be respected. The principle that integrates these aspects is individual freedom (i.e. the right to act according to one’s own judgement, provided it does not violate the rights of others), which implies the respect for volition in human interactions and relationships. In other words, the only moral basis for value-exchange and — by extension — value-distribution is the principle of individual freedom. Furthermore, to restrict morally sanctioned value-exchange is to restrict individual freedom, and hence, such a restriction is also a violation of individual rights. Hence, morally, individuals must be free to exchange values under the principle of individual freedom.
Given that the right to property is fundamental and given that free trade and agreement — including contractual agreement — is the moral right of any individual, the only moral system is one that sanctions and protects both of these rights. The name given to such a system is laissez-faire capitalism. The particular methods of implementing such a system can vary, but three principles are constant: the right to property, the right to free trade and the enforcement of contracts. I want to stress that no individual rights are possible without the right to property, since property is the means by which an individual can seek, use and dispose of his values as he sees fit, i.e. it is the basis of his right to own life and thus his individual freedom in practice.
As may already be apparent, an economic system rests on a political system, which means laissez-faire capitalism defines not only the principles of economics but also the principles of governance (i.e. politics). In particular, it defines the overriding obligation of the government to be the protection of individual rights; after all, it is only by the protection of individual rights that the right to property, free trade, etc. can be protected logically and legally, especially long-range. Laissez-faire capitalism defines the government’s role not as a ruler but as a servant. Crucially, it also defines that there must be a separation of state and economics.
The separation of state and economics means that, apart from the protection of individual rights (including property rights, free-trade rights and contract laws), the government plays no role in the economy. But here, we have the first critique: capitalism does not prevent the concentration of economic power. This is a problem because the critique has these premises: (1) people have very unequal opportunities and abilities, which makes it possible or even probable that a minority of the population gains the majority of the economic power, and (2) enough concentration of economic power leads to political power, i.e. the power to change the state’s laws or their enforcement so that the law unjustly favours some over others in one or more respects.
Let us validate the above premises. Premise 1 is undoubtedly true. Firstly, a variety of non-volitional factors can affect the opportunities people have, e.g. geography, cultural and societal background, economic means, accidental factors, etc. Secondly, people have varying degrees of various abilities for various reasons, e.g. upbringing and education, the allocation of time and energy, health and fitness, genetics, etc. Hence, the view that the concentration of economic power is dangerous, rests on the premise 2. Premise 2 is supported by many actions of private businesses around the world, such as:
However, it is key to ask what private businesses have to gain from such political engagement. If we assume the profit motive to be at least one important motive for the actions of private businesses, we can extend the same motive to their political engagement. Now, note that we are assuming that there is a separation of state and economics, since our critique is against such a separation. If there is a separation of state and economics, then the government has no power over economic opportunities, e.g. through regulation, licensing, selective taxation (e.g. tariffs, tax-cuts, product-based indirect taxes, etc.), trade-based bans (e.g. banning exports of a certain product, banning the trade of certain goods and/or services), and subsidies. In such a case, for the most part, political engagement is not in line with the profit motive.
Of course, there is still the possibility that economic favours could be used to gain favours from the law enforcement, and the concentration of economic power could give some people a far greater power to exert such influence over law enforcement. However, here we notice two things: (1) such actions would still be illegal, which means every party involved in them would be at risk of discovery and much greater long-term loss, and (2) a government which has no economic powers depends more than any other government on the trust and support of its citizens, giving it a far lesser incentive to let open or clear affronts to the law go unanswered and a far greater incentive to prove that justice has been and will be served. Furthermore, note that giving the government regulatory powers is an ineffective solution, since the same incentives within the government that allowed the corruption of law enforcement would exist even now but to a greater extent.