Freeman

ARTICLE

Is There a Moral Basis for Capitalism?

AUGUST 01, 1983 by CHARLES DYKES

Mr. Dykes is a businessman, free-lance writer and enthusiastic advocate of the free market.

The contemporary indictment of capitalism usually takes two basic forms. First, there is the economic indictment. Those who make the attack from this perspective argue that capitalism is not viable because it is afflicted with insurmountable contradictions which result in a permanent state of crisis, or problems which can only be temporarily resolved by palliatives. Second, there is the moral indictment. Capitalism, according to this view, is the exploitation of man by man, the profit motive and the rule of money supreme, with an inevitable cruel injustice everywhere manifest.

The claim that capitalism provides the best economic structure for man’s moral development, long a virtual article of faith in American life, is met with derision these days by politicians, journalists, university professors, and theologians. Clergymen daily rage with indignation against the “evils” and “injustice” of the competitive market. Capitalism is, so we are told, “intrinsically immoral.” “Soul dead, stomach well alive,” was Thomas Carlyle’s estimate of the market system, and all the cultured despisers of commercial civilization are in hearty agreement.

The market order, we are informed, promotes a materialistic view of life. “Things,” Emerson once said bitterly, “are in the saddle and ride mankind.” The capitalistic form of economic organization is said to be dehumanizing. Owen Chadwick has brilliantly summarized the thought of Karl Marx for us on this point: “The structure of society derives from the work which men do. In bourgeois society the worker provides goods, to serve not the needs of men but the needs of the market. Then, instead of men controlling goods, goods control men; so that, the more workers produce, the wider the gap between rich and poor. This ill-arrangement may be called the ‘alienation’ of man’s work. A man’s work is ‘natural,’ part of the structure of living. Therefore the alienation of his work creates an alienation of man from nature, from his fellow-worker, even from himself. Economic nonsense pushed all relations awry. Men and women become things and treat each other like things.”[1]

Hostility Against Capitalism

The animus of many theologians against capitalism is especially bitter. Michael Novak gives a not uncommon example: “Jurgen Moltmann portrays capitalism as though it were outside the law, destructive of true community, reducing all relations to impersonal monetary relations, inspiring wolflike animosity between man and man and irrational in its pursuit of growth for the sake of growth and work for the sake of work.”[2]

Writing in The Christian Century in 1976, Bruce Douglass admits that most of the political and economic comment coming from theologians has a socialist flavor. He then goes on to insist that defenders of capitalism are engaged in what amounts to a justification of injustice, selfishness, and other forms of sin. The case for socialism, we are given to understand, is primarily concerned with justice, and is thus exactly the opposite.

What of these charges? Does capitalism “make the world free for sin-nets,” at the same time relentlessly alienating man from his fellows and himself, even as it dehumanizes him? Does it unleash, and then callously celebrate as virtue, a rampant and rapacious selfishness? Is it oblivious to, indeed destructive of, the demands of justice in human relations? Is it, in sum, without moral justification, and thus guilty as charged of being “intrinsically immoral”?

It is our conviction that these charges are entirely fallacious. Not only that: We are soundly convinced the market economy is securely anchored to the Judeo-Christian revelation. Neither the caricatures of its enemies, nor the perversions of its friends, can alter this fact.

A System of Relationships

The critics are right when they demand that our economic system rest on a firm moral basis. If it can be shown that it does not, then we should abandon it immediately and seek to establish a more just order. At the outset, however, important distinctions and clarifications must be made. Arthur Shenfield calls attention to one of the most vital, viz., “the economic system called capitalism is a system of relationships. It is a composition of markets, and markets are by definition systems of relationships, not purposive bodies. It follows that we can apply the tests of morality to capitalism only by considering the behavior of individuals who operate within it, not as a system capable in itself of being moral or immoral.”

It is Shenfield’s contention that since capitalism is “a system of relationships it cannot be moral or immoral in the sense that a purposive group can be . . . .” He denies, however, that such a system is morally neutral. “If its essential characteristics on balance positively nurture or reinforce moral or immoral individual behavior, it is a moral or immoral system in its effects.”[3]

Furthermore, we must repudiate the erroneous tendency of many critics to attribute to capitalistic economic phenomena, human behavior, social ills, or political crimes to which history bore witness before the birth of the capitalist system. And again, enemies of capitalism are prone to identify the market economy with society as a whole. For them, capitalism forms and permeates the whole of society, and in so doing destroys and corrupts human relationships other than those contracted for strictly economic purposes. But the truth is, the competitive market is only a part or aspect of any society.

“The market,” as John Davenport correctly observes, “is not an end in itself, but the means to higher ends.” The market is merely an element in a society which transcends and extends far beyond it. The market is but a method of recording consumer preferences and allocating resources, an information system which transmits knowledge spontaneously through the signals sent out by prices.

Allocation of Scarce Resources

All economic goods are, by definition, scarce, while the hunger of man for these goods is nearly infinite. Thus a workable economic system concerns the allocation of scarce re- sources—e.g., labor, materials, or capital—to human wants. Socialism assigns to a supposed omnicompetent state the task of deciding what people need, and then the development of a master plan as to what goods will be produced in what amounts. In the market economy, on the other hand, consumers bid on what they want via the price mechanism.

No matter what system a society employs for organizing its economic life, certain common decisions must be made. For example, all economies must decide what goods will be produced, and how the fruits of this production will be distributed. All economic systems coordinate men and materials in making these decisions in some way. The market system makes these decisions and achieves this coordination through an institution of private property rights and voluntary exchange.

From the days of Adam Smith, advocates of the free market have argued that market processes have a strong tendency to equate public benefits and private profits. Following the argument of Bernard Mandeville’s Fable of the Bees, Smith held that private vices—e.g., greed—are converted into public benefits.

A Harmony of Interests

There is, in a free market, a harmony of interests between the public and the private. Does this imply, then, that the free market, in some way, nurtures or reinforces unjust rather than just behavior? Not at all. The free market economy is the most productive form of economic organization just because it is most consistent with eternal moral principles. The economy of any society is integrally related to the moral principles and consequent values to which the society is committed and substantially adheres. Or, as Paul Johnson puts it, “The level of social morality is directly linked to the performance of the economy.”[4]

Consider the testimony of Wilhelm Roepke, one of the greatest economists of the twentieth century. He wrote: “One of the most dangerous errors of our time is to believe that economic freedom and the society which is based upon it are hardly compatible with the moral stan dards of a strictly Christian attitude.” In Roepke’s view, “the very opposite of this popular belief is true: the strongest reasons to defend economic freedom and the market economy are precisely of a moral character. It is economic freedom and the market economy which the moral standards of Christianity require, not the opposite economic system. At the same time, however, we have to say with equal force that economic freedom and the market economy re quire these moral standards. One conditions the other.”

Roepke understood that “Socialists and non-socialists are divided by fundamentally different concepts of life and life’s meaning. What we judge man’s position in the universe to be will in the end decide whether we believe our highest values to be realized in man or in society, and our decision for either the former or the latter will also be the watershed of our political thinking. Once more we find Cardinal Manning’s famous statement to be true: ‘All human differences are ultimately religious ones.’” The conclusion: “we should stand for a free economic order even if it implied material sacrifice and if socialism gave the certain prospect of material increase. It is our undeserved luck that the exact opposite is true.”[5]

The Family Unit

While keeping in mind that the market economy is only a part or aspect of society, we do contend that capitalism is more than just an economic system of voluntary relationships. Specifically, it is an economic system based on the right of private ownership of property and a free market for goods and services, consistent with the second table of the moral law.

The fifth commandment of the Decalogue, “honor thy father and thy mother,” implies that the family, not the state, is the basic social and economic unit of society and should be the strongest. R. J. Rushdoony has noted that “throughout history the basic welfare agency has been the family. The family, in providing for its sick and needy members, in educating children, caring for parents, and in coping with emergencies and disasters, has done and is doing more than the state has ever done or can do.”[6] A society characterized by a significant degree of economic freedom is always a society dominated by strong family units who provide for their own. This contrasts with socialism, whose basic goals, if realized, would destroy the family in the interests of the larger collective.

The sixth commandment, “Thou shalt not kill,” is, according to John Chamberlain “simply the other face of Locke’s and Jefferson’s ‘unalienable’ right to life.”[7] John Calvin explained it this way: “The sum of this commandment is, that we should not unjustly do violence to anyone.” “Thou shalt not kill” is thus a generic expression which also forbids wounding, violent threatening, and any unjust coercion by an individual, group, or state that would restrain legitimate liberty.

Economic freedom is born and thrives only in nations or communities where reverence for all human life is widely held to be a supreme value, where the personal safety of the neighbor and his family is generally regarded as inviolably sacred, and where compassionate individu als, acting either alone or through voluntary associations, are encouraged to offer substantial assistance to the poor and needy. This differs radically from the command society of socialism, whose adherents are frequently found not only approving but actively promoting violence, terrorism, and the destruction of the middle class. In such societies (and this would include the Welfare State) “compassion” is institutionalized, and becomes a monopoly of the state.

The seventh commandment, “Thou shalt not commit adultery,” teaches us, as does the ninth commandment, that contracts must be honored and double-dealing scorned. “The historic link between the biblical idea of binding covenants and the Western idea of binding contracts,” writes Gary North, “is obvious enough.”[8] The very idea of contracting for joint benefit presupposes a high level of moral integrity and faithfulness on the part of all the parties engaged in the transaction.

In socialism the paternal state seeks to vitiate the necessity for the sanctity of contracts by substituting its omnipotent controls and decrees. Opportunity for moral development and the growth of trust between free men is thereby suppressed. The socialist ethic in this area is readily illustrated in the attitude of contemporary socialist bloc nations toward the fulfillment of treaty obligations. The Soviet Union, for example, has violated every treaty it has ever made. Lacking an unchanging moral foundation, there is nothing in the socialist ethic to condemn such action.

Private Ownership

The right of private ownership is based on the eighth commandment, “Thou shalt not steal.” According to the Westminster Shorter Catechism, this commandment requires “the lawful procuring and furthering the wealth and outward estate of ourselves and others.” The commandment forbids “whatsoever doth or may unjustly hinder our own or our neighbor’s wealth or outward estate.” The eighth commandment “means that the Bible countenances private property—for if a thing is not owned in the first place it can hardly be stolen.”[9]

Harold Lindsell, in the course of explicating the hatred of socialist intellectuals for private property, unmasks the latent hypocrisy usually present. He observes that “ideas are property too. Professors who write books to expound their ideas secure copyrights which protect their words against plagiarism. Das Kapital by Karl Marx was protected by copyright. Just try to find a new book published by a socialist which is not protected by a copyright! The simple truth is that socialists consistently violate their basic premise about private property in areas such as this so that they may profit from their labors!”[10]

The ninth commandment forbids lying. The whole idea of a free market implies that the parties to this voluntary exchange will not deceive each other. The doctrine of the harmony of interests in freedom largely depends for its working upon substantial voluntary compliance with this command.

Lying is an inescapable concomitant of socialism. The socialists must forever condemn profits, for instance, and the profit motive. But the truth is, socialist nations are just as profit- minded as are capitalist nations. The difference: In capitalist nations the individual reaps the profits and decides how they will be used; in Socialist nations the state reaps the profits and determines what to do with them. So lying, even about its basic tenets, is crucial to socialism.

The tenth commandment, “Thou shalt not covet,” “means that it is sinful even to contemplate the seizure of another man’s goods—which is something which Socialists, whether Christians or otherwise, have never managed to explain away.”[11] Coveting is a root of all social evil.

How Envy Destroys

Envy, a central aspect of covetousness, involves not only the desire to possess another’s property, but also—and perhaps more heinous—the desire to see another’s wealth or station reduced to the level of one’s own. “Envy is ineluctable, implacable and irreconcilable, is irritated by the slightest differences, is independent of the degree of inequality, appears in its worst form in social proximity or among near relations, provides the dynamic for every social revolution, yet cannot of itself produce any kind of coherent revolutionary programme.”[12]

Rushdoony points out that the tenth commandment “forbids the expropriation by fraud or deceit of that which belongs to our neighbor. The tenth commandment therefore does sum up commandments six through nine and gives them an additional perspective. The other com mandments deal with obviously illegal acts, i.e., clear cut violations of law. The tenth commandment can be broken within these laws.” This law forbidding dishonest gain “is directed by God, not merely to the individual, but to the state and all institutions. The state can be and often is as guilty as are any individuals, and the state is often used as the legal means whereby others are defrauded of their possessions.”[13] Socialism, through its employment of the police powers of the state for the purpose of expropriating the wealth of producers to transfer to nonproducers, is a form of institutionalized envy.

Christ summarized the second table of the law like this: “Thou shalt love thy neighbor as thyself.” Shenfield observes that we usually understand the command to love our neighbor “to mean to heal the sick, to succor the poor, to relieve human distress of all kinds, and the like.” He then suggests that whatever else such love means, “It must mean that one wishes one’s neighbor to have what one most values for oneself . . . .” In the final analysis, “what we want above all for ourselves, and which therefore we must accord to our neighbor, is freedom to pursue our own purposes.”[14]

Our conclusion, then, is that the claim that capitalism is inherently immoral is not only false, but the exact opposite of the truth. Only the much-maligned capitalism, of all contemporary forms of economic organization, is founded upon and consistent with an immutable moral foundation.


1.   Owen Chadwick, The Secularization of the European Mind in the Nineteenth Century (Cambridge University Press, 1975), p. 64.

2.   Michael Novak, The Spirit of Democratic Capitalism (New York: Simon & Schuster, 1982), p. 262.

3.   Arthur Shenfield, Imprimis, “Capitalism Under the Tests of Ethics,” Vol. 10, No. 12, December 1981, pp. 1, 2, 5.

4.   Paul Johnson, Enemies of Society (New York: Atheneum, 1977), p. 191.

5.   Ail quotations from Roepke are found in “The Moral Necessity of Economic Freedom,” Intercollegiate Studies Institute, Inc., ISI Brief Essay Series, No. 1. Reprinted by permission from Christian Economics.

6.   R. J. Rushdoony, The Institutes of Biblical Law (Nutley, NJ: The Craig Press, 1973), p. 181.

7.   John Chamberlain, The Roots of Capitalism (Princeton, NJ: D. Van Nostrand Company, Inc., 1965), p. 46.

8.   Gary North, Chalcedon Report, “The Yoke of Co-operative Service,” No. 123, November, 1975.

9.   Chamberlain, op. cit., p. 46.

10.   Harold Lindsell, Free Enterprise (Wheaton, Illinois: Tyndale House Publishers, Inc., 1982), pp. 52-53.

11.   Chamberlain. op. cit., p. 46.

12.   Helmut Schoeck, Envy (New York: Harcourt, Brace & World, Inc., 1970), p. 247.

13.   Rushdoony, op. cit., pp. 634-5.

14.   Shenfield, op. cit., p. 6.

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August 1983

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