Capitalism is widely credited, even by its critics, for the unprecedented human prosperity and wellbeing we are experiencing today in the free and semi-free – the most capitalistic – countries, based on measures such as GDP per capita, life span, literacy, access to labor-saving energy, and productivity. The free and mostly free countries, such as Switzerland, United Kingdom, United States, South Korea, are ahead of the repressed and mostly unfree countries, including Cuba, Iran, Russia, and North Korea, by a wide margin.
Surveys show people refer socialism or to capitalism
Yet, there is a growing anti-capitalist – anti-growth, anti-human-prosperity – movement underfoot. It emanates from universities where professors in humanities and social sciences frequently present only Marxist interpretations of capitalism as a system that ruthlessly exploits both people and the planet for profit. From the academia, these ideas spread to activists of the likes of Greta Thunberg, to governments that seek to curtail capitalism with regulations and taxation, and to the activist media that spread the anti-capitalist narrative.
It is no wonder then that most people, according to a recent survey conducted in the mostly free countries of United Kingdom, United States, Australia, and Canada, prefer socialism or to capitalism. Most respondents across all four countries believe that socialism (which they defined as “government providing more services to people” or “government providing a minimum guaranteed income,” i.e., an expanded role for the state) would improve the economy and their wellbeing.
But it is alarming that most businesspeople, particularly, business leaders, seem to agree with the majority, judging from their silence in the face of attacks on capitalism by academics (including at business schools), governments, activists, and the media. Some business leaders also endorse the anti-capitalist view, led by CEOS like Larry Fink or Blackrock and Marc Benioff of Salesforce. This is alarming because capitalism is the (gradually eroding) bedrock of their ability to operate their business profitably.
Capitalism properly defined
Capitalism is a system of freedom that makes a thriving human life, including production and trade of goods and services – the work of business – possible. It is the only social system that protects individuals’ freedom against physical force initiated by others, and therefore the only system consistent with human nature, or with what we require to survive.
We survive by thinking – using reason – and by producing the goods and services our survival requires, from food and housing to health care and insurance. Reason and production can only thrive under freedom. And they have been since the Industrial Revolution, as Matt Ridley accounts in “How innovation works and why it flourishes in freedom,” up until the recent expansion of the anti-capitalist sentiment. The latter is reflected in increasing government interference in business, such as the attempts to control and restrict free speech on social and other media, to phase out fossil fuel energy, and to restrict free trade through tariffs and quotas.
Instead of suffocating business with taxes and regulations, the government must recognize the crucial role of freedom in our ability to survive and thrive and return. It must return to its proper – and only – role: protecting freedom. In practice, this means protecting individual rights to life, liberty, property, and the pursuit of happiness against those who initiate physical force and fraud, through laws and the courts, the police, and the military.
This was not recognized by earlier thinkers on capitalism, from Adam Smith to Karl Marx. Ayn Rand was the first defender of capitalism to identify individual rights as the social recognition of human nature and its needs. She defined capitalism as “a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.”
The current mixed economy is hardly capitalism despite having some elements of freedom – which the government frequently curtails or cancels and introduces more controls. The only way to stop the current slide into increasing government control (and eventually, into dictatorship), is to push back on government interference in business and in our lives. As economist George Reisman optimistically writes, it only take a few voices to start a pro-capitalist movement that will encourage and embolden others to join. The business leader voices defending capitalism are indeed few, but some have spoken out, such as Michael Medline, CEO of Empire Foods.
Two fundamentals in advocating for capitalism
We don’t need to be Michael Medline or even a CEO to defend capitalism. Although it takes courage to challenge the majority view, advocates of capitalism need only two fundamentals in their arsenal: claiming the moral high ground and defining capitalism by essentials. With that foundation, advocacy can take many forms, from calling out governments on their violations of individual rights through regulations or taxes to speaking up when capitalism is attacked.
I outline the two fundamentals only briefly here and will elaborate on them in future articles.
Taking the moral high ground means asserting the moral right of business to pursue its self-interest: profit maximization by producing material values while respecting the rights of others. This entails only voluntary, mutually beneficial trade with employees, customers, and suppliers and therefore, no violation of others’ rights.
Defining the capitalism by essentials means identifying individual rights as the central principle protecting people’s freedom from coercion by others – without which capitalism cannot survive.