CCS Grad Wins Essay Competition On the Morality of Capitalism
I take much pleasure in announcing that Ujwal Batra, a recent graduate of our ìpolicy course in liberal philosophy and public policy and one of our past Researching Reality Winterns, has won an essay competition on the morality of capitalism organized by TFAS International.
The assignment was to answer the following:
Is there such a thing as the morality of capitalism? Or do you think the values of capitalism are amoral or immoral? What about in times of economic crisis? Do markets still work? Please use examples from your own country or another country in Asia to illustrate your argument.
Congratulations, Ujwal!!
Here is the full text of his essay. I hope you enjoy:
Values in the Marketplace
The Morality of Capitalism
Morality is not so much a matter of systems as it is a matter of men. It thus follows that if we are to form a basis for the morality of capitalism, we must first examine the tendencies and workings of man. Proceeding from there, we may make a case for the moral basis of capitalism.
Men are guided by self-interest. They have goals, and they employ means in the pursuit of these goals. This is the basic structure of human action — it is impossible to even conceive an alternative. You may alter a man’s environment but you cannot alter his basic tendencies.
Indeed, it would be absurd to negate the functioning of men, or to dismiss men pursuing their ‘self-interest’ as being immoral, for the simple reason that men must necessarily function so. The only question worth addressing then would be this — is it prudent for men to pursue their self interest vis-a-vis the ‘larger interests of society’ (whatever that term may mean)? Or, putting it differently, is self-interest in conflict with, or does it negate the interests of society?
This leads us to that peculiar expression — ‘the public good’ or the ‘interests of society.’ To address this, we must first understand what society is, and what the ‘interests of society’ are. Also, if we indeed are to admit that term, we must examine the means best suited to attain the ‘interests of society.’
Society is but the name we give to our fellow human beings. It is a collection of individuals interacting in certain ways, holding certain values — with their interactions culminating in a certain pattern, a certain culture. The only constituents of a society are men, and the only interest of society is the interests of the men who constitute it. The fallacy of the ‘societal good’ divorced from the good of men stems from imagining society to be an entity divorced from the men who comprise it — with a will and interest of its own.
The interests of society, may thus be captured by the Utilitarian expression — ‘The greatest happiness of the greatest number.’
So, how must society proceed to achieve ‘the greatest good of the greatest number?’ This is the central question underlying the debate between alternate forms of social organisation. Socialism envisages a powerful state as the means to secure the prosperity of men, while capitalism puts the individual in the center of society and believes in the power of individuals to secure the happiness and prosperity of all men.
It seems relevant here to examine Capitalism and its basic propositions.
Capitalism, in its essence, is a system that establishes certain conditions for the interactions among individuals. These conditions stem from the workings of men. The most basic of these conditions is the right to hold, acquire and dispose of property i.e. private ownership of the means of production. The other condition is a limited government and a proper rule of law that does not impinge on the liberties of the people.
I have come to understand capitalism to be different from other economic systems in the sense that it does not explicitly define, or rigidly map out, the interactions between different elements of an economy. It simply states the necessary conditions in which human interactions can flow unimpeded. It thus concerns the conditions conductive to human interaction and not the interactions themselves (as we see in socialism).
This flow of human interactions — when it proceeds unimpeded — creates its own order that is not strained or imposed. Order in capitalism, therefore, is not an ideal to be ceaselessly pursued, but is a byproduct. It stems from freedom and results in order. And therein lies its morality.
Its morality also lies in its prudence. Men, acting freely, weave miracles. A society, a subset of which are the interactions in the marketplace, is a living thing. It cannot, and must not be subject to institutions and systems that prevent its flowering. Dynamism, then, is the essence of the market. That dynamism finds expression in market signals, in accordance with which men act and resources get channelled in their most productive outlets. For a system to be sustainable, it must necessarily be dynamic, it must respond to the needs and aspirations of the people. It must not be left at the mercy of the state to dictate what men may produce, and how they are to produce it.
Weaving Miracles
Enabled by this dynamism, time and time again we see individuals weave miracles.
South Korea, once dismissed as ‘a hopeless case’ back in 1960s, today has emerged as one of the most powerful economies of the world, after following a capitalist pattern of development.
Talking about India, where I come from, the last two decades saw its transformation from being a socialist economy to being a relatively free economy. India largely followed a ‘Socialist’ pattern of growth in the decades that followed its independence in 1947. I often hear my parents talk about the years that preceded its phase of liberalization, of how one had to wait for 7 years to get a telephone connection, and 15 years to get a car. Despite the noblest of intentions, successive 5 year plans and elaborate mechanisms to secure prosperity among the people failed. There was widespread poverty, misery and starvation. It took nearly 5 decades for India to acknowledge its mistakes and change course.
The results are for all to see. Per-capita income has almost quadrupled compared with 1991. There is an unmistakable rise in the prosperity and standard of living of people.
And yet, a lot remains to be done . India ranks a dismal 111 in the latest Economic Freedom Index, published by the Fraser Institute. A business still has to make its way through endless Red Tape and bureaucracy. Another unfortunate fact is that the Right to Property is not recognized as a Fundamental Right and the state can, in its pursuit of ‘the public good’, deprive men of their property.
Capitalism and Economic Crisis
If we are indeed to examine the morality of capitalism, we must make a case for its sustainability as well. And this leads us to the question of economic crisis. There are two concerns to be addressed here. One, is the free market prone to crisis, with its business cycles and recessions? And two, if it indeed is, what forms an adequate response in times of crisis or recession?
In response to the first question, the answer is yes. The free market is prone to recurrent crisis. But we need to understand the significance and meaning of a crisis. The standard ‘Keynesian’ view holds the market to be an imperfect mechanism, forever in need of intervention and government interference. A recession, in its understanding, signifies a collapse of the market and is an assertion of its imperfection.
The lesser known ‘Austrian’ perspective, holds precisely the opposite view. In their theory of the business cycle, a recession signifies not a collapse or a breakdown, but is a necessary, inherent and self-correcting mechanism of the market. A slump in economic activity is an indication of resources wrongly channelled. The breakdown is a signal to revalue and reallocate resources to better channels.
It is this latter view, I believe, which is rooted in fact and holds merit. In times of crisis, if the market is allowed to be, it would take care of itself. This is a significant departure from what is commonly believed and followed by economists worldwide. It is absurd to believe that an outside agency, like the government, can ‘correct’ the workings of the market. The government has neither the capacity, nor the initiative and certainly not the knowledge that market participants have.
The River Creates the Banks that Hold It
I once heard a wonderful expression — ‘The river creates the banks that hold it.’ As the river creates its banks, it also defines its boundaries — and it flows within those boundaries. This quite aptly captures the essence of capitalism. Markets continuously evolve, in pace with the needs and aspirations of the people. To borrow an expression from Hayek, there is a ‘spontaneous order’ in play, forever channelling the efforts and creativity of people. This great system of social cooperation has made possible the innumerable amenities that surround us. It is more complex than any human mind can fathom or design, and yet it proceeds with a certain discipline. Here thus lies the morality of capitalism — in its discipline, its dynamism, its order, and above all — in its freedom.
