John A. Allison is Retired Chairman and CEO of BB&T Corporation, the 10th largest financial services holding company headquartered in the U.S. In March 2009, he joined the faculty of Wake Forest University School of Business as Distinguished Professor of Practice.
The America we live in today is not a capitalist country. For more than a century, we have lived in a mixed economy - a mixture of capitalism and socialism - in which the government interferes in more and more of our decisions, and takes away more and more of our wealth.
Genuine capitalism is based on the principle of individual liberty--the inalienable right to follow your own dreams and act according to your own judgment. It means the right to start a hair salon without seeking a government license, or the right to take a drug your doctor thinks could save your life, regardless of what some FDA bureaucrat thinks.
Genuine capitalism is based on the principle of inviolate private property - including the inalienable right to the product of your own work. It means the right to spend your money on expanding your business rather than on someone else’s retirement, or on a family vacation instead of your neighbor’s tonsillectomy.
Genuine capitalism is based on the principle of voluntary association - individuals deal with one another by persuasion and trade rather than physical force. It means that no matter how noble someone thinks his goals are--whether it’s building wind farms or sending other people’s children to college or erecting a bridge to nowhere--he has no right to force them on you. And it means that no matter how misguided someone thinks your goals are, so long as you are peaceful he has no power to stop you from living the kind of life you want to live.
Capitalism is the system where there is no government manipulation and distortion of the market (e.g., the Federal Reserve and Freddie and Fannie’s affordable housing policy that created the financial crisis), no alphabet regulatory agencies dictating and overseeing your every action, no wealth redistribution schemes to give your hard-earned income to causes someone else thinks are worthy.
Capitalism, in brief, is the system where you’re free to set your own goals and make your own choices, to find a career you love and rise as high as your ability and ambition will take you, to deal with others through win-win trades, and to keep the fruits of your labor.
I believe that this is the moral system. But the supporters of the mixed economy disagree. They call it selfish, greedy, heartless, immoral--and righteously claim the power to use force to get you to obey their vision of the “common good.” They hold that a society based on voluntary association is “exploitive”--and have replaced it with a dog-eat-dog system of pressure group warfare, where your freedom and wealth are at the mercy of how much political influence you can muster.
But capitalism is not exploitative. I spent nearly twenty years as the CEO of one of America’s largest financial institutions, BB&T, and one of the things I saw again and again was that a businessman who abandons principle and tries to make money at the expense of others, although he may succeed in the short run, is doomed in the long run. Taking advantage of people is not truly selfish, it is self-defeating: people will not trust you. You might fool Fred and Suzie, but they will tell Tom, Dick, and Harry and no one will trust you. Being untrustworthy will put you out of business.
The reason BB&T has been so successful is because we help our clients achieve economic success and financial security. They voluntarily pay us for this service, allowing us to make a profit. Both BB&T and our customers are better off from this win-win relationship. On a free market, where you can’t seek favors or bailouts from Washington, business is about creating these types of win-win relationships--by figuring out ways to benefit your clients while making a profit doing so. (And, if you do defraud your customers or engage in some other crime, the government in a free market is there to put a stop to it.)
But, you may be thinking, isn’t pursuing profit and your own self-interest wrong? Don’t we have a moral obligation to altruistically put the needs of others above our own? That is what we’re taught--but why is it true? Why is it moral to serve other people’s happiness, but not your own? Why is it wrong to try to make the most of your own life, neither sacrificing yourself to others nor others to yourself? Don’t you have as much right to your life as anyone else has to his?
You may have detected a theme running through the arguments made by the Ayn Rand Center representatives over the course of the debates. Underlying all of our arguments is a single basic principle: that you should be free to live your own life, and that no one--not the government, not your neighbors--should be able to force you to live the way he thinks you ought to. Our view, in other words, is that you have an inalienable right to pursue your own happiness. What could be more moral than that?
There is much in capitalism that brings out the moral best in people. And there is much that can bring out our immoral worst. The challenge in any society with a market economy is to maximize the best of capitalism and minimize the worst. In turn, that requires striking the right balance between a dynamic private sector and an empowered public sector as well as civil society.
I’ll say more about that balance in a minute. But first let me say what is moral about capitalism. For starters, capitalism is great at producing wealth and prosperity correlates with any number of positive moral outcomes. As Benjamin Friedman has persuasively argued in his book, The Moral Consequences of Economic Growth, rich, market-based societies tend to be more tolerant and open minded; they tend to be more rational, basing collective decisions on science rather dogma; and they tend to foster more social mobility and fairness.
So all that is good. As well, it’s pretty clear that markets can nurture positive moral behavior on the individual level. To prosper in a competitive market economy, you need to have certain virtues, like the ability to work hard and plan for the future and try to improve yourself and be creative. In theory at least, those with more of this kind of virtue, get bigger rewards in a free market system.
But the moral downsides of capitalism are equally obvious. Thirty years ago, in his classic book, The Cultural Contradictions of Capitalism, Daniel Bell argued that modern capitalism, and the consumer culture that went with it, elevated the pursuit of short-term gain and pleasure over the more traditional values of self-restraint and obligation toward others.
This is a pretty elementary idea, and more relevant now than ever. The way I see it, capitalism, at least the aggressive brand of it we practice here in America, has come to erode some very important shared human values. Increasingly, we’ve seen the ascendancy of the rational, amoral logic of self interest, profit and efficiency, not to a mention a me-first, consumer mentality. In the face of this logic, it has become harder to defend a fuzzier set of ideals, like our kinship with other people – our compassion for others, our respect for others, our obligation to others. As well, it is harder to see ourselves as citizens who share a common fate with total strangers, who think in terms of we, not me.
Examples of the moral downsides of capitalism are everywhere around us. Just take a moment to contemplate what I call the “morality gap.” On the one hand, there have been major improvements in many moral areas over the past few decades – crime is down, divorce is down, drunk driving is down, teenage pregnancies are down, drug use is down – yet at the same time, as I’ve documented in my work on cheating, we have seen a surge in all kinds bad behavior: more corporate frauds, more tax evasion, more usurious lending, more doctors in bed with drug companies, more lawyers overbilling their clients, more employers cheating their workers out of wages, more accountants looking the other way as books are cooked, more students cheating, more athletes taking steroids, and so on. It is no exaggeration to say that every major profession today is in something of an ethics crisis.
What accounts for all these problems? The answer lies in the way that market values have become dominant in this age of turbo-charged capitalism.
There are many other examples of how unrestrained market forces have come to undermine values that nearly all humans care about. You can see this damage in the environment, in our popular culture, and in family life, to name just three areas.
The solution is not to get rid of capitalism. Capitalism is the goose that lays the golden egg. Rather, the answer is to check the moral downsides of capitalism with institutions that defend human values. Government regulation is all important in this regard. But, as I said, we need to get the balance right: We don’t want so much government as to significantly undermine wealth creation or individual initiative. But we don’t want so little that immoral behavior goes unrestrained.
In my view, the balance in recent years has been tilted way too far toward deregulation and it’s time to redress that imbalance.