Previewing First Principles: Is Capitalism Moral?

Thursday, April 28, 2011

Next Monday is the third and final debate in the First Principles debate series sponsored by Demos, the Ayn Rand Center, and It's A Free Country. Today, Ezra Klein of the Washington Post (representing Demos) and John Allison, chairman of BB&T and professor at Wake Forest University, preview their debate around the question "Capitalism: Is it Moral?"

Klein began by saying the very question is based on a category error.

Klein: Asking someone if capitalism is moral is like asking if the scientific method, or a wrench, or my toilet, or the telephone is moral, or for that matter, is happy or sad. It's not a person, capitalism, it's not even a society, it's an economic system and it can be oriented towards ends that we would consider moral or not moral. What capitalism is, broadly speaking, is effective.

Is America a capitalist country?

Not in the purest sense of the word. Allison said the U.S. system cannot be called capitalist, it is rather a mixed economy.

Allison: But every time we have problems in the economic system instead of government regulation or government interference in the market. So whenever the things go wrong we get more regulations which actually reduce our standards of living so we don't' have a free market in the U.S. we have a highly regulated economic system in many factors and the regulated part of the system is where we typically have the biggest problems.

Klein agreed that Americans do not live in a purely capitalistic system, and suggested that pure capitalism would actually result in fewer profits.

Klein: In a truly working capitalistic market, profits go down to zero, because there should be so much competition you really shouldn't be able to have any margin, because any time you do have a margin somebody should be undercutting you till really it's razor thin.

Inequality--Capitalism's fault?

The Brian Lehrer Show had a debate about inequality recently with liberal economist Joseph Stiglitz and the chairman of the Council of Economic Advisers under President George W. Bush, Glenn Hubbard. What the two agreed on is that inequality in America is rising--the top one percent now makes 25 percent of all the income each year, where they made only 12 percent in the 1980s. Is that the product of an increasingly capitalist America since the Reagan presidency? Allison said no.

Allison: I don't think that equality is a measure of ethics. That would be like saying it's unethical for Michael Jordan to be a better basketball player than me. I think the measure of ethics is whether a system is consistent with man's fundamental nature. And as human beings our fundamental nature is that we have to be able to think independently, to be free to think, to be productive, to be creative.

Klein ended by saying that the problem with Ayn Rand's philosophy of capitalism rewarding those who merit rewards is that, well, there's a lot of luck in life.

Because one thing that can happen in an overly meritorious society is that somebody gets all of the rewards and essentially develops a monopoly on too many of the resources and then those resources aren't there for other people to make their contributions as well.

This is just a preview! For more, attend the First Principles Debate on May 2!


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Comments [30]


Markets are simply information tools, freighted with issues of class, race, gender and what some economists call environmental "externalities." There are varieties of capitalismS, from the French or German models, to Chinese "Market-Leninism" to India or Japan, all of which employ markets to some extent.

Since unlike the Ayn Rand-ists I believe social democracy to be the highest form of human expression and achievement, the key feature of social democracy is to evaluate what is outside market-information processes, like health care, and what can still be delivered--well or not so well-by markets, such as a sandwich at a corner sandwich shop.

In the U.S. the public dialogue is saturated with possessive individualist cant about capitalism, but in fact large corporate actors, and any self respecting small businessperson, should have as their goal as much insulation from markets as possible. This is what has been achieved by Exxon and other actors who also use their $ and market power to influence the state and manipulate markets and politics in a very unhealthy way.

There is nothing necessarily moral about capitalism, which mostly features the suspension of democracy at the workplace, and the on-again/off-again application of the Hard Budget Restraint (bankruptcy for firms), or the gaming of the state to produce a Soft Budget Restraint (as Goldman, Sachs and Bank of America managed).

Key areas of life, health care, housing, education, environment, transportation, agriculture, caregiving are either wholly outside the market or function best when partially outside the market. Congestion road pricing is a good example of the use of markets to achieve social objectives; private health insurance is the example of how markets simply can't work.

The last few Nobel prizes in economics, in both macro and micro awards, featured many economists who have successfully identified defects in the neo-classical conceit that "markets always clear."

May. 02 2011 04:20 PM
Dick - Define Key Concepts

In order to make more understandable the answer to the question "Is Capitalism Moral?" it is important to know what each side means by "Capitalism" and "Morality," the two key concepts. I look forward to see if they agree on the meaning of these concepts or how they disagee.

May. 01 2011 11:38 AM
digerati32 from Buckinghamshire, UK

Economic theory tell us that there are scarce resources and everyone has to compete. In fact it is the axiom from which all economic models are born. But how true is it? I believe that Nature tells us differently that resources are abundant and what is scarce is knowledge.

To create a free society all we have to care about is ensuring the democratization of knowledge. Prosperity can be born out of your environment provided you have the right knowledge and you are free to exploit it without breaking any spurious laws.

It is from then on moral to reward those that produce or create more. Once we have the freedom to move and exploit our environment plus free access to knowledge of any kind..we can have equality which is moral.

Apr. 30 2011 12:46 PM
diya from Mumbai

There is no doubt that people of merit should get their rewards....that's what makes life worth living.

One person's discovery and success benefits others automatically....if nothing new is invented then there will be stagnation.....who wants that?

Let us help people who want to do something which has never been done.....who knows what that person will give us

If we are concerned about too much profit for one person then I would say it's fine as long as others in the society are getting something worthwhile out of it.....after all everyone of us cannot be inventors so what's the point being miserly when the question of giving credit and rewards come.

As Rand has also shown that its a two-way process.

Apr. 30 2011 10:08 AM

This debate should attempt to define what is moral and what is Capitalism. I fear that the there will not be any resolution between altruism and egoism over which is moral if the debate is focused on economics. One side will say it is right to redistribute wealth while the other side will say it is wrong to steal some people's money to give it to others

Apr. 30 2011 07:55 AM
Michael Caution from Columbus, OH

Saying that liberals, or more precisely collectivists, want everyone to be equally poor stems from the fact that the end result, their protestations to the contrary, to all their policies is the destruction of wealth. I'm referring to corrupt ideologies such as egalitarianism and social justice. The Michael Jordan comment demonstrated the fact that we all are not equal in ability. So it is natural and right for there to be disparity in incomes between different people. To ignore this and force some idea of equality of outcomes is a sham and is not equality at all.

As to your Hickman smear/distortion I'll simply quote Rand herself in the character of Francisco d'Anconia, "It is not advisable to venture unsolicited opinions. You should spare yourself the embarrassing discovery of their exact value to your listener."

Apr. 30 2011 12:17 AM
Michael Caution from Columbus, OH

To John Allison: Don't let Klein change the debate topic. Capitalism is moral b/c it protects individual rights and as Rand states, "'Rights' are a moral concept—the concept that provides a logical transition from the principles guiding an individual’s actions to the principles guiding his relationship with others—the concept that preserves and protects individual morality in a social context—the link between the moral code of a man and the legal code of a society, between ethics and politics. Individual rights are the means of subordinating society to moral law."

Capitalism is moral b/c it is consonant with the moral code necessary for each individual's life. It is morality expressed in the interactions of society. This is why it is called a socio-economic system not just an economic one.

Apr. 29 2011 11:46 PM
Harrison Bergeron from Fair Lawn NJ

American-style captalism as an economic system, and American style democracy as a political system, are at extreme odds:
. Our democracy requires informed, fair-minded citizens to operate well.
. Our capitalism rewards selfishness.

Apr. 29 2011 10:07 PM

I agree with Mr. Allison. If you believe in living by moral principles then it can never be right to take someone's property against his will for another's use. When that line is crossed the government becomes a rights violator rather than its protector, and the end of that road is totalitarian dictatorship of whichever style: socialism, communism, fascism, and today, Islamic theocracy under Sharia law.

Apr. 29 2011 09:04 PM

capitalism is just a roadway, that's like saying, "is the internet moral?"

morality is the crafting of one's own soul, perhaps guided by religion, customs or arguably even the law.

its the additives to capitalism, the rules, the government, religious interests, etc. that infect it with morality.

Apr. 28 2011 05:08 PM

There are degrees of capitalism. Here is one observation: A friend's family just went through an ordeal in India when a newly hired maid kidnapped their toddler, who was gone for 48 hours and happily returned. This happens a lot in third world countries where there is such inequality. I've been with friends in S. America where you had to hire someone to protect your car if you wanted to eat in a restaurant. People live behind walls with shards of glass deterring those who would leap over - or with dogs who get poisoned. We aren't safe without a big middle class.

Apr. 28 2011 02:53 PM
Dr.Saul Moskowitz from WOODBURY,NY.

In my opinion,the question should be based on what does it do to affect human behavior and the human condition.Is it concerned with the "common good" or not.Does Capitalism take exploitation,racism,pure luck,benefits that accrue from class(education opportunities or financial benefits) etc into account in determining its benefits to society?The main question to me is why can't a person be judged on his innovation for the common good?Pure capitalism without restraint can be moral but it isn't!

Apr. 28 2011 12:11 PM
Edward from NJ

@Bill from Manhattan,

John Allison would probably argue* that the FDIC hurts his business by propping up "inferior" bankers. If there were no FDIC, his "personal excellence" could shine through, and he would be able to offer his customers better interest rates. He's "compelled" to buy into it because the government has "manipulated the public" to demand it and not doing so would destroy his business. He would probably also argue that deposit insurance should be a privately-sold option for consumers who wish to buy it.

*I don't agree with most of this, but it's probably what he'd say.

Apr. 28 2011 12:05 PM
Henry from Manhattan

If you want some insight into Rand, this article on her fawning over a serial killer of her day will be quite informative.

“What did Rand admire so much about Hickman? His sociopathic qualities: ‘Other people do not exist for him, and he does not see why they should,’ she wrote, gushing that Hickman had ‘no regard whatsoever for all that society holds sacred, and with a consciousness all his own. He has the true, innate psychology of a Superman. He can never realize and feel ‘other people.’”

Yeah, "wonderful" ideology there...

Apr. 28 2011 11:44 AM
Edward from NJ

@Bill from Manhattan, excellent point!

So many proponents of totally unfettered capitalism have benefited greatly from the government's hand in the market. They all think of themselves as the independent capitalist hero of their own private Ayn Rand novel while they have far more in common with the crony capitalist villains.

Apr. 28 2011 11:29 AM
dboy from nyc

Ol' Hazel (below) has got a point!

Apr. 28 2011 11:14 AM

Why in the world is the anti-capitalist view being put forth by a reporter for the Washington Post (I don't care if he's representing Demos). There should be an academic, someone who has written on the subject, like Robt Jensen from the Univ of Texas and who has written extensively on the subject. Or Naomi Klein. Not someone who works for that bastion of privilege, elitism and conservatism the Wash Post!!!

Apr. 28 2011 11:11 AM
dboy from nyc

Awww... wha' happened to my hillbilly comment???

Apr. 28 2011 11:10 AM
Henry from Manhattan

John Allison, completely mischaracterized the notion of equality. It’s not that everybody can be Michael Jordan, it’s about offering equal opportunity as best we can as a society. That’s not too difficult to understand so I’m going to suspect that he’s being deliberately obtuse.

Allison’s idea that thinking is this all-important activity is a quite suspect. I’ll have to listen again to what he said here, but it really sounded skewed and silly.

Liberals want to make everyone poor? Oh shut up. Can we have a real discussion or is it just going to be high school level debate? No sorry, I’m being unfair to high school debates that are generally more intelligent than this.

I feel bad that Ezra Klein had to actually to respond to some of these asinine comments, it’s a waste of his time.

Apr. 28 2011 11:10 AM

@Bill from Manhattan

I second Dboy from NYC!

Apr. 28 2011 11:06 AM
dboy from nyc

@ Bill from Manhattan


Outstanding point!!!

Apr. 28 2011 11:05 AM
John A.

Anybody who concludes that his field of study is irrelevant to morals is, knowingly or unknowingly, a worm. Become aware.

Apr. 28 2011 11:03 AM
art525 from Park Slope

OK I'm glad it''s not just me. I'm sure it's not fair of me but the Ayn Randian Just sounds so ignorant without listening to his positions. Then when I focus on them it just confirms it for me. I'm glad Mr Klein who is so much more articulate called Allison on his besmirching liberals. It seems unfortunate that he is in the position to shape young impressionable minds at Wake Forest, filling them full of Rand's cultish nonsense.

Apr. 28 2011 11:02 AM
Bill from Manhattan

I find it interesting that the gentleman speaking for unfettered capitalism is the chairman of an organization whose entire business model is based upon it being able to gather deposits from the public that are insured by the federal government and borrow at advantageous rates from government enterprises like the Federal Reserve. He should recommend that BB&T renouce deposit insurance and operate as a purely capitalist enterprise to be intellectually consistent.

Apr. 28 2011 10:59 AM
CL from NEw York

BL has waded into a subject so far beyond his knowledge and preparation as to make this show segment another superficial waste of time. No serious attempt to define capitalism, no discussion of its history and critique (including Marx's magnum opus), no rigorous insistence that abstract philosophical terms be grounded in careful, logical argument, and no credible analysis of how the unregulated financial system exposed the crudeness of the Rand "objectivist" position.

Apr. 28 2011 10:59 AM
Ken from Brooklyn

In the 1800s there was more of a "free market" but to what human cost, John Allison? Workers certainly were not more free. Try convincing someone working 12 hours a day in a factory that a free market benefits them.

Apr. 28 2011 10:58 AM
jane from bronx

what about China which is quickly overtaking US as top economy

Apr. 28 2011 10:58 AM
Robert from NYC

I bet this guy would love to see the return of slavery. What a snob (I'm being kind). How arrogant can one be!

Apr. 28 2011 10:57 AM
jgarbuz from Queens

Before pesky government regulation, we had slavery up to 1865.

Anyhow, income disparity between workers and capitalists, is due to the fact that capital can go anywhere in the world, but labor cannot. Capital is mobile; labor is basically stuck in place. When labor can move as freely throughout the world as does capital,income disparities would be mitigated.

Apr. 28 2011 10:57 AM
Robert from NYC

Hm, the last word in my first sentence should have been "isn't" not "is".

Apr. 28 2011 10:53 AM

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