Despite of living in a world that has extensively benefited from the capitalist production system, it still seems necessary to make questions about its ethics. There is no doubt that since its adoption and generalization, people around the world has experimented unprecedented wealth and freedom, but there are still issues that plague the world where capitalism has had no power to solve. Many even find the cause of said problems in the capitalist system. This paper will analyze the definition, elements and criticism of capitalism as exposed by William Shaw in his book Business Ethics to find out if capitalism is morally justified.
The Capitalist Economic System
According to Shaw, the capitalist system can be defined as one where the elements that conform the productive force in a society are privately owned . Although it is a common definition, it leaves out the instances where the State owns most of the productive elements but still utilizes the capitalist arrangement for producing wealth . Capitalist arrangements do favor the private property of productive factors, the division of labor and market-set prices , but it does so because those elements actually foster capitalism. This economic system appears where individuals have access to the product of their labor and not the other way around . Modern capitalism only appeared when there was freedom to have property and where people were allowed to keep what they produced . Moreover, capitalism created the system of information that provides signals of what needs to be produced and in what quantities in a society. Today this system is known as market , and it is what ultimately gives individuals the proper incentives for using their creativity to produce (Mises; Huerta De Soto).
Elements of Capitalism
A good Aristotelian definition should include elements that differentiate the concept being defined from others. Mr. Shaw mentions some elements that supposedly belong to or are exclusive of capitalism. However, these elements can actually be found in other systems or can be absent in capitalism, or even be present in times in history where capitalism did not exist. For example, in the book Business Ethics it says that one definitory element of capitalism is the existence of companies . Companies are an important part of socialist systems as well as their collective nature implies a recognition of groups and the existence of collective entities that produce or administer the wealth produced in their societies . On the other hand, there is no need for companies to exist to have a thriving capitalist market such as the existent on the fringe of most third world societies or even throughout most of the western United States during the nineteenth century . One other element mentioned by Shaw was the profit motive, as he explains that it is actually a recent phenomenon and the main drive of a company or a capitalist entity . This is of course debatable. The lust for profit has been worrying men for millennia. This can be proven by reading old Mesopotamian writings such as the Ludlul_bēl_nēmeqi or Poem of the Righteous Sufferer, where a dying man complains about the greed of merchants and powerful people . Shaw goes as far to say that profit was a foreign concept in older civilizations or even absent in Eastern civilizations , but Greeks had already devoted considerable amounts of discussion to the problems of money, profit and chrematistics. It is true that the nobility and the philosophers at the service of the aristocracy despised these activities for considering them ignoble , but it just means that people who were not part of the Greek elite did exercise economic activities seeking profits but the intellectuals did not approve of it just as it happens today . Even the Roman law from the early empire and late republic encouraged what is called today Laissez Faire and accumulative profit, and early Christians exhorted work and to be fruitful and multiply . On the other hand, Eastern markets were rich and dynamic by the time Europeans arrived with their fleets and started organizing forced control over trading routes all over the Indian sea way before capitalism got there . In the case these elements, individual or collective entities seeking profit, could be seen as morally wrong, they do not seem to belong to capitalism. They seem to appear normally in almost any human society to date. Their apparition predates capitalism.
One other element added by Shaw was the element of self-interest and appetite for money as the main motivation that drives individuals in capitalism. While it is true that most people hope to make profits, it is actually not what creates wealth. Wealth is created by individuals with creative solutions for problems that affect others . The profit is actually a byproduct of this creation and the wealth amassed by individuals in a capitalist society is just a very small fraction of what they help create . Again, the appetite for wealth predates capitalism, and capitalism does not seem to produce it.
Egoism as Driver of Capitalism
While it may be true that egoism is what drives capitalism, the definition of egoism used by Shaw is not enough to create a comprehensive understanding of capitalist motivation. Shaw mentions the Firestone case as representative of egoism in capitalism. But other companies have made statements of more altruistic views such as Ford Motors, one of the biggest representatives of American capitalism, which wanted to make cars available for everyone, raising the standards of living of thousands of Americans.
Egoism, as Shaw defines it, would only encompass a behavior that seeks to further personal interests . But if egoism is the driver of a capitalist society, and it would only allow altruistic behavior if it advances the agent´s interests, how come capitalist societies are the world´s most charitable nations?
Humans are the best ones to provide themselves with the sufficient means for their survival. This would mean that self-interest is the most effective way to assure the survival of an individual . Egoism, as defined by Shaw, would have a negative implication by equaling it to a cruel and ruthless person who would try to obtain benefits from others. This is not true at all. If an egoist person considers the wellbeing of another as valuable, it would try to make that other person happy out of love for himself . Egoism, as pictured by Shaw, would not allow this kind of actions or would only attribute it to selflessness.
The negative view of egoism would taint capitalism with it. But altruism would actually destroy the fabric of society. It would mean that the only way to obtain a benefit is to expect others to provide it so it would be acceptable to force others to produce through the use of the state, denying people of whole production. Hayek said that an altruistic behavior of society was inherently bad because it would divert the effort of many from the occupations they are actually good at, reducing what is produced as a whole. Hearing the advice that is constantly repeated by the mass media favoring selflessness would have all society suffer from great deprivation by diverting the effort of productive people to activities where they are not as efficient . He goes on to say that the altruistic behavior, common for tribal or closed societies, if applied to the extended society, would actually destroy it. The same thing would happen if the impersonal behavior of the extended society were to be applied at the core of the family or small social groups .
Capitalism is a human institution and, like all other, is a system with fault. What the critics of capitalism tend to see are its apparent deficiencies, but fail to see the adaptive capabilities of capitalism and its ability to correct itself. Capitalism, as Arthur Seldon says, is redeemable: any fault it has can be corrected, and has proven to be able and willing to do so over the years . Capitalism has driven more people out of poverty than any other system ever and does not seem to cause any of it. One can hear about how inequality grows in the United States caused by capitalism, but that is a product of misinformation. Studies showing inequality do not take into consideration the fact that most people that were poor during the 70´s, went up a step or two on the social scale during the next two decades. Meaning that if there are more poor people today, it just means that there are more young people that are just graduating, and more newly arrived immigrants that are just starting to work their way up the scale . The richest portion of society has not become richer. They are in fact less rich, and many of them have gone down the economic scale, giving way to people who were maybe very poor during the 70´s . Capitalism is the only system that has allowed such mobility in the history of mankind. Without it, poor people would have never had the chance of changing their economic status and goods such as cars or refrigerators would be only available to the richest part of society, just as it was before it appeared.
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