Question: What is capitalism?
Answer: According to the philosopher Ayn Rand in her essay “What is
Capitalism?,” capitalism is “a social system based on the recognition of individual rights, including property
rights, in which all property is privately owned.”
The recognition of individual rights entails the banishment of physical force from human relationships:
basically, rights can be violated only by means of force. In a capitalist society, no man or group may initiate the
use of physical force against others. The only function of the government, in such a society, is the task of protecting man's
rights, i.e.., the task of protecting him from physical force; the government acts as the agent of man's right of self-defense,
and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing
the retaliatory use of force under objective control.
It is the basic, metaphysical fact of man's nature—the connection between his survival and his use
of reason—that capitalism recognizes and protects.
The mission of our organization is to promote Ayn Rand’s vision of a free and unfettered people
as best as our knowledge and abilities allow.
Question: Sometimes your positions make you sound like you are conservatives, while other times they make you sound like you are liberals.
Which side are you on?
Answer: Neither. Like millions of readers across the globe, we found inspiration
in Ayn Rand’s uncompromising vision of free and unshackled minds. Accordingly, we reject the current intellectual status
quo and we are neither conservative, liberal, nor anywhere else in-between.
Instead, we represent the first advocates of a sweeping new outlook on existence, the requirements for
man’s survival and prosperity, and the means by which man properly comes to know his nature. Animated by the philosophy
we seek to uphold and share with others, we are proud radicals for reason, egoism, and capitalism.
Question: You say you are in favor of the free market—but can't big corporations interfere with free competition?
Can't they force employees, distributors, and suppliers to accept their terms? So isn't government force, such as antitrust
prosecution, necessary to protect individuals from this "economic force"?
Answer: As private corporations, business has no power to force anyone. The entire claim that that businessmen can coercive
their customers (and, indeed, the entire case for the antitrust laws) is based on equation between economic power and political
power. The difference between these two forms of power must be kept strictly in mind—for it is a difference with life-and-death
In "The Dollar and the Gun" (The Objectivist Forum,
June 1983), philosopher Harry Binswanger defines the difference between these two forms of power:
"'Political power' refers to the power of the government. The special nature
of that power is what differentiates government from all other social institutions. That which makes government government,
its essential attribute, is its monopoly on the use of physical force. Only a government can make laws—i.e., rules of
social conduct backed up by physical force. ...The penalty for breaking the law is fines, imprisonment, and ultimately, death.
The symbol of political power is a gun.
"Economic power, on the other hand, is the ability to produce material values
and offer them for sale. E.g., the power of Big Oil is the power to discover, drill, and bring to market a large amount of
oil. Economic power lies in assets—i.e., the factors of production, the inventory, and the cash possessed by businesses.
The symbol of economic power is the dollar.
"A business can only make you an offer, thereby expanding the possibilities
open to you. The alternative a business presents you with in a free market is: 'increase your well-being by trading with us,
or go your own way.' The alternative a government, or any force-user, presents you with is: 'do as we order, or forfeit your
liberty, property, or life.'"
The only power a business has to induce customers to give it money is the
value of its products. If a business started to produce an inferior product, it would eventually lose its customers. By contrast,
the only power that the government has to offer is a threat: "We'll dictate what businessmen can and cannot do—and businessmen
better toe the line or we'll throw them in jail."
Question: Under capitalism, what will happen to those who are born without the wealth and opportunities enjoyed by others? Doesn't
capitalism make the rich richer and the poor poorer?
Answer: Quite the opposite. Capitalism is the one system that leaves everyone
free to rise by his own efforts. The history of capitalism provides countless instances of people who improved their lives
through work and ability. There are the millions of immigrants who came to America and worked their way up to the middle class—or
higher. One of the great historical examples was Andrew Carnegie, who rose from a penniless sweeper at a steel mill to revolutionize
the steel industry and make one of the largest fortunes of his day. It is no coincidence that 19th century America—the
most purely capitalist era in the nation's history—brought us the phrase "from rags to riches."
The reason why capitalism allows people to rise by their own efforts is that capitalism is driven by only
one fundamental consideration: profit. But profit can only be earned through an increase in the production of wealth: profit
comes from inventing a new product, producing a good more efficiently, promoting it to a wider market, etc. It comes from
doing things better, faster, and smarter than before. This means that capitalism offer an open field to anyone who works hard
to improve his skills—and it offers riches to anyone who thinks hard and comes up with new and better ideas. It is under
capitalism, for example, that a company like Microsoft creates scores of millionaires out of individuals whose qualification
is not inherited wealth or social connections, but only the ability to create and sell computer programs.
The rule under government regulation, by contrast, is very different. It is a common error today to talk
about "crony capitalism." Cronyism is in fact a hallmark of state-run economies. When politicians and bureaucrats hold power
over the economy, the only hope for success comes from currying their favor. Thus the competition for wealth becomes a competition,
not over who can produce the most, but over who can make the most bribes or call in the most favors. It is under these systems
that established wealth, family connections, and the "Old Boy's Network" become the determinants of success, rather than individual
ability. But that is a problem created and perpetuated by statism, not capitalism.
Question: If capitalism rewards only ability, what will happen to those who can't compete? What will happen, for example, to people
with physical or mental disabilities, who can't work as hard or as fast as others?
Answer: The first question in evaluating any social system cannot be: What
happens to those who are helpless and incapable of supporting themselves? Such people, by definition, are dependent for their
survival on others—on those who are capable of working and who can produce wealth. Thus, the first question must be:
What happens to the thinkers and producers? What conditions make it possible for them to think and produce? The fundamental
answer to that question is: freedom—the freedom to direct their own actions and to keep the property they have
produced. Thus, to advocate taxes and regulations on the producers in the name of helping the disabled is a hopeless contradiction—it
means helping the non-producers by throttling the producers on whom they depend.
It should also be pointed out that, under capitalism, those who are incapable of supporting themselves
are a tiny and ever-shrinking minority. The trend today is to inflate the ranks of the allegedly helpless by defining everything
to be a “disability”—including such vague and non-debilitating conditions as “chronic fatigue,”
allergies, and “depression.” But the reality under capitalism is that fewer and fewer conditions are disabling.
In a pre-industrial society, where most people survived by heavy physical labor, an injury to a hand or leg could make a worker
destitute. Today, a quadriplegic can make a living simply from the power of his mind to solve problems—and the power
of computers (produced by capitalism) to help him communicate his thoughts.
Under capitalism, therefore, the genuinely helpless are a very small minority who could easily be supported
by private charities—charities made possible by a capitalist society’s extraordinary wealth. But the condition
that makes this charity possible is that those who cannot support themselves respect the rights and freedom of those who do.
Question: Under capitalism, how do you justify the disproportionate rewards given to CEOs, who earn hundreds of times as much as their
Answer: A recent study claimed that corporate CEOs make, on average, 400
times as much as the company's lowest-paid employee. Let us assume that this figure is correct. Is that really "disproportionate"?
Let us concretize the question. What kind of work is performed by the lowest paid worker in a company?
This worker might be, for example, a janitor. His work consists of performing routine, pre-established tasks, requiring little
thought and only moderate physical effort. If he performs his work well, there is a moderate benefit: a clean workplace is
more productive than a dirty one. But if he performs his work poorly, the consequences are minor—and the worker can
easily be replaced by a better janitor; since the skills required are not complex, almost anyone can perform the job properly.
In the case of a CEO, by contrast, his work consists primarily in making decisions—decisions about
what products the company should produce, how much it should invest in improvement of its equipment, whether it should raise
money through stocks, bonds, venture capital, etc.
Bear in mind that wealth is not produced by blind, uncoordinated action. The best employees in the world
working the longest hours are useless unless they are making a useful product backed by adequate funding and good marketing.
Consider, as an example, the failure of the satellite telephone venture Iridium, a project with no shortage of brilliant engineers
and rocket scientists—but without a realistic business plan.
But ensuring that a company's resources and personnel are being used productively is the job of the CEO.
In justice—if justice means rewarding merit—an employee ought to be paid in proportion to
the value he brings to the company. By that criterion, is there anything "disproportionate" about paying the CEO an enormous
salary? If there is, the disparity is in the other direction. A good CEO of a multi-billion-dollar company is not worth so
little as 400 employees, much less 400 janitors; he is worth as much as thousands of employees. Their work is profitable only
as long as he makes the right decisions.
Of course, a bad CEO—one who makes poor decisions and wastes a company's resources—can wipe
out the work of thousands of employees. But that is precisely why companies offer their CEOs such enormous financial rewards,
rewards that are often dependent on the company's performance. For such a crucial position, nothing less will attract and
motivate the best minds.
Question: Aren't capitalists just "exploiters" of laborers? Isn't it workers who physically create products and generate economic
Answer: The labor theory of value states that all economic value is created
by labor. Thus, on this theory, the value of a loaf of bread, for example, is dependent on how much people worked to produce
that loaf. If this were true, then all wages paid for anything other than physical labor (i.e. management work) would be unearned
since only labor creates value.
But economic value is objective. That is, value is not produced by sheer physical labor, but also by the
mental effort of businessmen who coordinate the efforts of those laborers, and by the entrepreneurs and stockholders
who put their money on the line to fund such enterprises (and deserve a return on their investment). The value of the product
of this work is determined by both the cost of these things and the value of the product to potential purchasers. This last
(among other things) is what the Marxist ignores. By the Marxist theory, labor deserves payment, even if no one wants to buy
the product that has been produced, simply because of its labor. Capitalism properly rejects the Marxist's one-sided approach
and rewards both physical and mental labor for the value each creates.
Question: Under capitalism, would business owners be allowed to discriminate based on race, sex, and other irrelevant characteristics?
Wouldn't capitalism help perpetuate racism?
Answer: Freedom to make the right choice has to also include the freedom
to make mistakes. Freedom of speech, for example, cannot mean "Say whatever you want, as long as you agree with me." It has
to include the freedom to espouse wrong and even vicious ideas (including racism).
For the same reason, individual rights must include the right to act irrationally. People have a right
to decide who they will hire and who they will accept as a tenant, customer, business partner, and so on. To take away that
freedom is to take away a person's right to control his own life and property. It is contradiction to say, "Your life is yours
to live—so long as you don't do anything I disapprove of."
Left free to control their own lives, some people will act irrationally; they will refuse to hire employees
or to accept customers on the basis of race, sex, or other irrelevant characteristics. Capitalism recognizes their right to
make such irrational decisions—but it does not grant them the right to escape the consequences of their irrationality.
A man who runs his business on the basis of irrational prejudice will suffer the economic consequences.
If he hires a mediocre man in place of a talented woman, he suffers the loss in productivity—while someone else, who
does hire the woman, profits from her talent. If he refuses to serve a customer because he is black, he loses a customer—while
a rival gains that customer. The free market encourages rationality. It does not encourage a businessman who arbitrarily rejects
talented workers and paying customers.
This is why, as a matter of historical fact, every entrenched system of prejudice has been backed by government
support. Segregation in the American south and apartheid in South Africa are just two examples. If left free, businessmen
will seek profits by hiring the most competent workers and by accepting every paying customer, regardless of race. That's
why government regulations—regulations excluding the mixing of races in the workplace and forbidding businesses from
serving customers of a particular race—were required to prop up racism.
But that, once again, is a problem created by state controls, not by capitalism.
Question: Doesn't unrestrained capitalism lead to the destruction of the environment?
Answer: The essence of capitalism is man’s attempt to improve his environment—but
not in the sense meant by the environmentalists.
The goal of production in a free market is to give man an ever-greater power over his environment. Consider
the power man has gained after only 200 years under capitalism’s Industrial Revolution. To give just a few examples
that bear directly on human health: fertilizers and pesticides have made possible an unprecedented production of food, eliminating
the periodic famines that plagued all pre-industrial societies; rapid and inexpensive transportation, powered by fossil fuels,
has made all kinds of foods available everywhere year-round, making improved nutrition possible; universal availability of
refrigeration (thanks to CFCs) has made possible the safe storage of food; air conditioning (also thanks to CFCs) has minimized
the health danger of extremely hot weather; electrical power, generated by nuclear and coal-fired power plants, provides a
source of heat and light that is safer and more reliable than fire; the development of plastics has made possible the invention
of numerous life-saving medical implants and devices. This is just the tip of the iceberg. Thanks to thousands of advances
such as these, life today under capitalism is incomparably safer, cleaner, and healthier—not to mention more comfortable—than
it has ever been in human history. But all of these advances were produced by corporations seeking profit on the free market.
Thanks to capitalism, the average lifespan in industrial countries has increased steadily to more than 70 years—compared
to less than 40 in pre-industrial societies.
But this is not what the hard-core environmentalists mean by protecting the environment. They seek to
protect the environment, not for man, but from man. They do not merely oppose, say, dumping toxic chemicals into the drinking
water (which would be illegal under capitalism). They seek to preserve nature in an untouched state for its own sake, and
not for any benefit it brings to man. Nature, many mainstream environmentalist thinkers declare, has intrinsic value. Thus,
they seek to stop all industrial activity, regardless of whether it helps or harms human life. This is why environmentalists
have opposed every single advance mentioned above: fertilizers, pesticides, fossil fuels, CFCs, nuclear power, electric power
lines, plastics and so on. The environmentalists oppose these things because they value the inviolability of nature more than
they value human life.
If “the environment” means what today’s greens defend—nature preserved for its
own sake, apart from and against the value of human life—then we may be grateful that capitalism destroys the environment.
What capitalism offers instead is, in reality, the best “environment” for man: nature harnessed by industry and
technology and used for man’s benefit.
Question: Don't recent events in Russia and the Far East show the "dark side" of capitalism? Doesn't unrestrained capitalism lead
to kleptocracy, cronyism, and anarchy?
Answer: Russia and the Far East are hardly examples of “unrestrained
capitalism.” Laissez-faire capitalism means not only private property and the rule of objective law but the complete
separation of the state from economic activity—conditions that do not exist in these areas.
The fall of the Soviet Union in 1991 did
not usher in capitalism. It merely replaced communism with socialism. Most property there has not been privatized, and the
legal system remains anti-business. No businessman in Russia can count on a legal system that upholds contracts. The theft
of Western aid by former party officials and state-favored gangsters is only further evidence that a corrupt government, not
private business, runs the Russian economy.
Moreover, the Western aid to Russia came
from the International Monetary Fund, an anti-capitalist agency whose funding derives from taxes on Western producers. No
capitalist system would permit such a theft—whether from taxpayers or by gangsters and cronies of the state posing as
Russia’s devaluation of the ruble
in August 1998 was, again, an act of theft by the state bank and a further example of the expropriation of wealth. Only under
socialism does one find such “robber barons.” Under capitalism the money and banking system is owned and operated
by private banks, not by financial ministries that are mere appendages of the state.
“Crony capitalism” is a misnomer.
Under capitalism, there are no state favors or subsidies to business. Entrepreneurs succeed solely on the basis of merit,
not state handouts. It is socialism and a mixed economy that breed “cronyism.” State interference in the economy
can make or break businessmen, and thus it’s unavoidable that these businessmen will spend money trying to influence
state officials. To get money out of politics, one must get politics out of money-making. That’s what capitalism does.
There is no “influence-peddling” under capitalism because the system bars the state from exerting influence over
The Far East is also a mixed economy—
although with a lesser degree of state control than in Russia. But, like Russia, the Far Eastern finance ministries devalued
their currencies and thereby caused a wave of bank failures and recessions. The International Monetary Fund’s involvement
in these countries only made matters worse, as the IMF advocated raising taxes, intensifying regulation, and imposing capital
It is commonly believed that socialism means
government favors to labor, that fascism means government favors to some racial group, and that capitalism means government
favors to business. But what about a system with no government favors to any group? That’s true capitalism.
The labeling of any failed system in the
world today as “capitalism” is but a repeat of the same old socialist myth. Once again, just as in the Great Depression,
capitalism is being blamed for the evils engendered by statism. Capitalism once again is made into a scapegoat. No rational
observer should fall for it. Russia did not become communist in a day and it won’t become capitalist overnight. Achieving
capitalism requires fundamental philosophic change: a respect for reason and rational self-interest, the protection of individual
rights, and the complete separation of government from business.
Question: How can you refer to a big, powerful corporation as being "persecuted"? Why do businessmen need someone to defend them—as
if they didn't have enough money to do it themselves?
Answer: To answer this question, we need only look at the Microsoft antitrust
case. Who is arrayed against Microsoft? A coalition of anti-business leftists and self-appointed "consumer advocates"; a cabal
of jealous competitors who have hired high-powered lawyers and lobbyists to promote a government attack on Microsoft; and
then there is the Attorney General and the Justice Department, with virtually unlimited resources at their command; there
is the Congress, where both Democrats and Republicans support the attacks on Microsoft; there is a federal judge who is ignorant
of the technical issue in this case and who does not regard the issue of individual rights as relevant to the antitrust laws;
finally, there is the press, which alternates between portraying Microsoft as a malevolent Big Brother and portraying the
case as too complicated or technical for the layman to take sides.
Who is on the side of Microsoft? There is Microsoft itself—and us. Furthermore, Microsoft's efforts
are widely dismissed on the grounds that it is merely protecting its own interests. In the code of modern American politics,
it is the victim of government intervention who is considered to have the least right to speak in his own case.
If the majority of businessmen spoke up consistently in defense of their own rights, and the rights of
other businessmen, then an organization like ours would be unnecessary. But the tragic aspect of the growth of government
controls is that the victims do not understand the justice of their own cause. Part of our goal is to help businessmen to
grasp this fact.
In the meantime, who will speak up for the rights of businessmen? Today, even the lowest specimen of humanity—especially
the lowest specimen of humanity—can count on support from numerous sources. A homeless drug addict has a dozen different
organizations, agencies, shelters, rehab programs, and the like devoted to his aid. A Nazi who burns a cross on his front
lawn knows he can call the ACLU to protect his rights. But what if a peaceful, responsible, productive businessman—even
a hero of American business—finds himself under attack? Who can he call?
What no one has grasped yet is
that capitalism is not just practical but also moral. Capitalism is the only system that fully allows and encourages the virtues
necessary for human life. It is the only system that safeguards the freedom of the independent mind and recognizes the sanctity
of the individual.
Every product that sustains and
improves human life is made possible by the thinking of the world's creators and producers. We enjoy an abundance of food
because scientists have discovered more efficient methods of agriculture, such as fertilization and crop rotation. We enjoy
a lifespan double that of the pre-industrial era thanks to advances in medical technology, from antibiotics to X-rays to biotechnology,
discovered by doctors and medical researchers. We enjoy the comfort of air conditioning, the speed of airline transportation,
the easy access to information made possible by the World Wide Web—because scientists and inventors have made the crucial
mental connections necessary to create these products.
Most people recognize the right
of scientists and engineers to be free to ask questions, to pursue new ideas, and to create new innovations. But at the same
time, most people ignore the third man who is essential to human progress: the businessman. The businessman is the one who
takes the achievements of the scientists and engineers out of the realm of theory and turns them into reality; he takes their
ideas off the chalkboards and out of the laboratories and puts them onto the store shelves.
Behind the activities of the businessman
there is a process of rational inquiry every bit as important as that of the scientist or inventor. The businessman has to
figure out how to find and train workers who will produce a quality product; he has to discover how to cut costs to make the
product affordable; he has to determine how best to market and distribute his product so that it reaches its potential buyers;
and he has to figure out how to finance his venture in a way that will best feed future growth. All of these issues—and
many others—depend on the mind of the businessman. If he is not left free to think, the venture loses money and its
product goes out of existence.
The businessman has to have an
unwavering dedication to thinking, not only in solving these problems, but also in dealing with others. He has to use reason
to persuade investors, employees, and suppliers that his venture is a profitable one. If he cannot, the investors take their
money elsewhere, the best employees leave for better opportunities, and the suppliers will give preference to more credit-worthy
The businessman's dedication to
thought, persuasion, and reason is a virtue—a virtue that our lives and prosperity depend on. The only way to
respect this virtue is to leave the businessman free to act on his own judgment. That is precisely what capitalism does. The
essence of capitalism is that it bans the use of physical force and fraud in men's economic relationships. All decisions are
to be left to the "free market"—that is, to the un-coerced decisions of buyers and sellers, manufacturers and distributors,
employers and employees. The first rule of capitalism is that everyone has a right to dispose of his own life and property
according to his own judgment.
Government regulation, by contrast,
operates by thwarting the businessman's thinking, subordinating his judgment to the decrees of government officials. These
officials do not have to consider the long-term results—only what is politically expedient. They do not have to back
their decisions with their own money or effort—they dispose of the lives and property of others. And most important,
they do not have to persuade their victims—they impose their will, not by reason, but by physical force.
The government regulator does
not merely show contempt for the minds of his victims; he also shows contempt for their personal goals and values.
In a free-market economy, everyone
is driven by his own ambitions for wealth and success. That's what "free trade" means: that no one may demand the work, effort,
or money of another without offering to trade something of value in return. If both partners to the trade don't expect to
gain, they are free to go elsewhere. In Adam Smith's famous formulation, the rule of capitalism is that every trade occurs
"by mutual consent and to mutual advantage."
It is common to condemn this approach
as selfish—yet to say that people are acting selfishly is to say that they take their own lives seriously, that they
are exercising their right to pursue their own happiness. By contrast, project what it would mean to exterminate self-interest
and force everyone to work for goals mandated by the state. It would mean, for example, that a young student's goal to have
a career as a neurosurgeon must be sacrificed because some bureaucrat decrees that there are "too many" specialists in that
field. Such a system is based on the premise that no one owns his own life, that the individual is merely a tool to be exploited
for the ends of "society." And since "society" consists of nothing more than a group of individuals, this means that some
men are to be sacrificed for the sake of others—those who claim to be "society's" representatives. For examples, see
the history of the Soviet Union.
A system that sacrifices the self
to "society" is a system of slavery—and a system that sacrifices thinking to coercion is a system of brutality. This
is the essence of any anti-capitalist system, whether communist or fascist. And "mixed" systems, such as today's regulatory
and welfare state, merely unleash the same evils on a smaller scale.
Only capitalism renounces these
evils entirely. Only capitalism is fully true to the moral ideal stated in the Declaration of Independence: the individual's
right to "life, liberty, and the pursuit of happiness." Only capitalism protects the individual's freedom of thought and his
right to his own life.
Only when these ideals are once
again taken seriously will we be able to recognize capitalism, not as a "necessary evil," but as a moral ideal.
—Robert W. Tracinski is editor of the Intellectual Activist
The worldwide discrediting of socialism has left our intellectual
leaders in an odd dilemma. The system that they hailed for decades as a moral and philosophical ideal has been shown to be
disastrous in practice, leading to stagnation at best and starvation at worst. Meanwhile, capitalism has led to the creation
of unprecedented wealth, advanced technology, and widespread prosperity. Yet capitalism is denounced by these same intellectuals
as a system of greed, materialism, and ruthless “dog-eat-dog” competition.
So it would seem that the system that enforces virtue leads to poverty—while
the system that encourages vice leads to prosperity.
There must be a trade-off, in this view, between being moral and being
practical. Given this alternative, the cynical "realists" choose the practical. They conclude that some degree of vice must
be tolerated in order to achieve the higher "social good" of prosperity, so they seek a “third way” compromise
between the moral ideal of socialism and the practical necessity of capitalism. But the "idealists" will have none of this,
so they conclude that if capitalism leads to prosperity, then prosperity itself must be evil. They declare that affluence
is a disease and join the environmentalists.
But there is another answer to this dilemma; there is a solution to
this apparent contradiction between the moral and the practical. That solution is to re-examine the premise that capitalism
is immoral. If we do this, we can see that every characteristic that makes capitalism practical is also a principle that makes
Capitalism is practical, many economists have argued, because it allows
individuals to act on their own thinking rather than being forced to obey the decrees of bureaucrats. Under capitalism, every
problem of economic production is tackled by thousands, even millions, of minds. The people whose thinking is successful will
thrive. They succeed because they find opportunities that others don't see, because they develop new products that no one
else has thought of, or because they discover more efficient production methods that have never been tried before.
In a free market, where everyone is free to start a business, raise
capital, and place his product on the market—each individual thinker has the opportunity to put his ideas into practice,
and to succeed or fail based on the merits of his idea. Those who succeed bring us new and improved products at an ever lower
cost, creating economic progress and prosperity.
In the regulatory state, by contrast, the edicts of politicians and
bureaucrats override the thinking of individuals. The result is that political expediency, rather than the truth or falsity
of an idea, determines who gets to put his ideas into practice. Thus, for example, a popular health scare about silicone implants
or electric power lines is backed by judicial action, in defiance of provable scientific facts; the congressional districts
in which ethanol is produced are regarded as more important than the fuel’s economic value; a union leader's ability
to deliver votes trumps the employer's judgment concerning what he can afford to pay; and so on.
Stated in more fundamental terms, it is the rational thinking of individuals
that causes the production of wealth. But government regulation acts to stymie individual thought, subordinating the knowledge
and creativity of millions of individuals to the edicts of public officials.
Thus, the practical value of capitalism flows from the need to protect
the creativity and freedom of thought of the individual. But isn’t this also a profound moral principle? Most
of today's intellectuals still recognize that we need to protect the thinking of the artist or the scientist—but the
same principle applies equally to the worker, the executive, and the industrialist. Only capitalism fully recognizes the moral
right of the individual to think and to act on his thinking—not just in his personal life or intellectual life, but
also in his economic life.
Economic production is not just a matter of thinking; it is also a
matter of motivation. Thus, according to economists, the practicality of capitalism also stems from the fact that it allows
individuals to set their own plans and pursue their own goals. Individuals are allowed to decide what career they would enjoy
most; what products would give them the best value for their money; what opportunities would give them the best return on
their investment; and so on. And capitalism does not merely offer the individual the freedom to pursue his own goals; it also
rewards him for doing so. It offers him, as an incentive and reward for achieving his ambitions, the prospect of making money.
As a result, people in a free market will work harder, longer, and smarter; they will take more risks and endure more hardships—so
long as the work is theirs to choose and theirs to profit from.
In a state-run economy, by contrast, the central planning of government
officials wipes out the plans of individuals. Since they don't own the business, can't control the course of their own careers,
and don't stand to gain or lose from their actions, the workers' predominant attitude is apathy. And why should they care?
If they succeed in increasing production, the extra wealth will be used to support those who haven't succeeded. "From each
according to his ability, to each according to his need" is the motto of the welfare state. But in such a system, who would
want to be the man of ability, conscripted into a life of unrewarded drudgery so that others can consume the product of his
labor? It is no surprise that every society that has approached this socialist ideal has found few volunteers to be the men
of ability who keep the economy running.
Stated in more fundamental terms, capitalism is practical because
it relies on the inexhaustible motive-power of self-interest. Under capitalism, people are driven by loyalty to their own
goals and by the ambition to improve their lives. They are driven by the idea that one's own life is an irreplaceable value
not to be sacrificed or wasted.
But this is also a crucial moral principle: the principle that each
man is an end in himself, not a mere cog in the collective machine to be exploited for the ends of others. Most of today's
intellectuals reflexively condemn self-interest; yet this is the same quality enshrined by our nation's founders when they
proclaimed the individual's right to "the pursuit of happiness." It is only capitalism that recognizes this right.
The fundamental characteristics that make capitalism practical—its
respect for the freedom of the mind and for the sanctity of the individual—are also profound moral ideals. This is the
answer to the dilemma of the moral vs. the practical. The answer is that capitalism is a system of virtue—the
virtues of rational thought, productive work, and pride in the value of one's own person. The reward for these virtues—and
for the political system that protects and encourages them—is an ever-increasing wealth and prosperity.
—Robert W. Tracinski is editor of the Intellectual Activist.