Is Capitalism Morally Bankrupt?

November 2008

But to get back to what Sir Samuel said about utilitarianism: I always have a great problem, even sitting here in this shrine to free markets, with the description of the motivation and rationale of the industrial economy we live in as actually being some random pursuit of self-interest. That seems to me not a very accurate description of what seems to me a system built on virtues rather than on calculation or on self-interest. So I put the economy into the wider group of social constructions, like families, organisations, political systems. I see all of them as built on virtues and undermined by vices. The economy is no different from that.

SB: Well, I agree with some of that as well. There have been quite a few books explaining the success of American business as a result of the Puritan tradition. Now I don't know if you'd agree with that, coming from a different tradition. But there was the idea, in all these books like R.H. Tawney's Religion and the Rise of Capitalism, that the successful businessman was working for his family and for God, and Max Weber had a lot to say about that sort of thing, but somehow the financial side has taken off, a sort of ostentation, which people like Andrew Carnegie would have hated.

I think we should also bring in, as well as the economists, the evolutionary biologists. Now this will probably shock a lot of people much more than Adam Smith, but why do people who have already got £10 billion try to get another £10 billion - and that's irrespective of what they do with it in their will? It's a kind of macho thing where one Wall Street person has got to have a bigger yacht than another, and they've amassed so much but they've still got no time to enjoy it. It arises originally from competition of the male to get the best female, it's why peacocks have such long tails, which only hold them back in the end. I'm not an expert on this but I accept the argument that there's a lot in human nature that can be explained by the primitive drive to get a mate.

DJ: Can I take us back to the present crisis? What do we think about the morality of bailing out bankers and other capitalists, who may or may not have done anything wrong, with taxpayers' money? This seems to be the issue that is particularly acute at the moment in both Europe and America, although there appear be different views on both sides of the Atlantic.

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Postkey

November 17th, 2011
8:11 AM

"The inflationary boom thus leads to distortions of the pricing and production system. Prices of labor and raw materials in the capital goods industries had been bid up during the boom too high to be profitable once the consumers reassert their old consumption/investment preferences." http://mises.org/daily/3127 However: "The period prior to the crisis was the most stable economic environment for generations. And, unlike most previous recessions, this crisis wasn’t preceded by an unsustainable boom in output. In the five years leading up to the crisis, overall GDP growth remained close to its long-run average and inflation differed from the 2% target on average by only 0.2 percentage points." http://www.guardian.co.uk/business/2009/jun/18/bank-of-england-mervyn-ki...

Josie Nguyen

December 15th, 2009
5:12 PM

Why is it that people always want to blame anything and everything such as 'the government' or 'the market' when in fact it is their own individual failure that causes harm to society. Greed is distinctly individual, not caused by the market or by the government. Government in a democratic society must respond to their electorate's stupid demands (such as easy credit to flip houses) based on individual greed. If there are enough stupid people among the electorate, they will form a majority that pressures government to act. Governments simply act democratically by responding to the majority pressure. Markets simply act to respond to the majority demand. Let's stop wasting our time finding faults with the market or the government. People, individually, are responsible for the current crisis, crises in the past and more crises to come.

Riaz Ahmad

December 27th, 2008
9:12 PM

It is rather strange that only since the international financial system went in to a free fall, hurting the western economies, the moral aspects of capitalism are being questioned. When it happened in East Asia, no one battered an eye lid in the west. Capitalism has been robbing the poor of the third world for centuries, no one in the west felt any need to question its morality. As usual, hypocrisy lurks in every nook and corner of west's dealings with the rest.

Anonymous

November 24th, 2008
1:11 PM

Nobody is interested in filling my pockets with money. Or yours. The transactions that have brought about the financial 'crisis' have been made by people hoping to make a profit. Pie in the sky economics, balloons that will pop; and all on a 'global' scale. There have been many warnings but to no avail, and while bitter medicine is being prescribed the conmen continue to prosper -- if you are silly enough to listen.

Escott

November 11th, 2008
4:11 PM

I would urge readers to read this essay by Rothbard http://mises.org/story/3127 which is timeless and the lessons of which we would do well to heed. It is worth noting for those who listen to Sir Brittan's comments that there is nothing free market about the pound, or interest rates, or fractional reserve banking... these are all creatures of the state and the interested observer will notice they happen to be all intricately involved with the current crisis. We do not have a czar fixing the price of oil or bread yet we seem to think it reasonable that we have a central bank fixing interest rates. We do not find it strange that our currency is backed by literally nothing, an experiment that has NEVER endured in history and has so far only been running since 1971 in which time, unsurprisingly to any follower of the Austrian school, levels of debt have exploded to unprecedented levels on nearly every relative measure one can think of. Fractional reserve banking in a private money world would have limited the expansion of credit but in a state backed, incompetently regulated order, we have seen former lions such as RBS end up with assets of 93 times its tangible equity at the end of 2007. (!) None of these features are a result of the free market and it is apodictically incorrect to blame it, the market responds to the institutional framework within which it works. In this case, infinitely elastic credit. Without fiat money and a fractional reserve banking system backed by central bank determined rates and implicit government guarantees of the banking system, we could not be in this mess in the first place.

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