Capitalism, as defined by Milton Friedman, refers to 'the organization of the bulk of economic activity through private enterprise operating in a free market...a system of economic freedom and a necessary condition for political freedom.' Friedman thus defends capitalism not for its own sake, nor even for its capacity to create wealth, but because of its association with individual, economic, and political freedom. The first thing to note about freedom is that it does not produce equality. So people wonder whether all this freedom is fair, and to the extent that it is unfair, whether it is immoral. Is it immoral to promote freedom if it ends up in a situation where some people have more stuff than others?
John Tomasi's work on The Moral Case for Economic Liberty sheds light on this question. The first issue to address is the popular association of capitalism with infuriating amounts of wealth, i.e. the idea that a capitalist is by definition a tone-deaf person who struts about dripping with diamonds, ignoring the poor, and saying annoying things like 'let them eat cake'. But in the sense defined by Friedman, the capitalist is any person engaged in any form of private enterprise: working hard on their own account to produce or earn the reward that they have chosen to pursue.
The idea of personal choice is therefore central to notions of freedom. And personal choice matters even if it produces a lesser amount of wealth than that produced by someone else's personal choices.
Problems begin to arise when people claim that owing to circumstances beyond their control, they are not able to make any meaningful personal choices. For instance, one cannot make a personal choice to dine at the Ritz if they don't have any money to pay the bill. A child cannot make a personal choice to excel at school if they have a chaotic home life and they're on the brink of starvation. So it looks as though personal choices are the luxury of those who already have significant material means and privileged, carefree, easy lifestyles.
For that reason a moral defence of capitalism only works if you believe that people always have a choice: they may not have a choice about their material conditions, but they have a choice regarding how to respond to those conditions. This is essentially what makes us human: our ability to choose how to respond in any situation.
Choosing to acquire things by forcing other people to provide them is not the best choice. Far better would be to choose to acquire things by one's own effort.
When you open your eyes and start to look around, you soon notice that very few successful people have a personal story about how easy life was for them growing up, how much their life spilled over with material advantages, and how they always had everything handed to them on a silver platter. Instead, a life of hardship usually lies not far beneath the current trappings of wealth: if not hardship in their own childhood, then in their parents' or grandparents' life story. Don't be fooled by the very few cases who can trace their family wealth back to the dawn of time because their bloodline runs back to Plutus himself. Such cases are not statistically significant. For the vast majority of human beings, the truth is that hardship is no reason not to make personal choices that ultimately lead to success. Hardship is therefore no excuse for doing nothing to improve one's own conditions, nor is it sufficient justification for forcing other people to share what they have earned.
Many people today assume that life is supposed to be fair, so they take it as self-evident that others must be forced by law to provide various things from within their own resources, in order to make everything fair. In other words, everyone has to share nicely even if they don't want to. Just like we learned in kindergarten, except this time there is the force of law behind it. The assumption is that the pursuit of fairness justifies legal interventions that redistribute wealth, even when that entails an encroachment upon liberty. 'Because of fairness!' is the modern rallying cry behind every legal intervention. This is particularly so in the world of work. We expect employers to be fair to workers and we expect all workers to be treated equally, because that way it's fair. Ultimately everyone should end up with more or less equal amounts of wealth, so that it's fair. To avoid sounding like a petulant child bemoaning the unfairness of having to do chores or go to bed early, it is necessary when grousing about unfairness to embrace appropriate philosophical terminology. That way it sounds like a respectable way of complaining, without actually being whiny. Here's where many people embrace Rawlsian perspectives: Rawls offers conceptual tools to complain about people being richer than you without appearing to be consumed with envy and jealousy and bitterness about other people's advantages in life.
There is some contestation regarding whether law is mostly about justice and fairness (and equality) or whether it's mostly about efficiency. The idea of efficiency doesn't seem to be extremely honourable, being connected as it is with capitalist markets and correlated associations such as greed, selfishness, and, worst of all, great wealth. This explains why lawyers value morality and human kindness above everything else. In Canada, where everybody is good and upholds the correct moral values, they're actually forcing lawyers to sign a blood oath promising to be good and kind and show equal love to everyone. Soon other countries will be following that illustrious example.
Is “equality” an essential component of justice? We know that justice is a good thing (nobody would argue that injustice is a great goal to aspire to) but does it follow logically that the full force of the law should be harnessed to equalize everything? Equal amounts of stuff, equal pay for all working people especially if they're women, equal benefits for all unworking people and equal opportunities for all to have an equally good life. Everything should be equally distributed. Because otherwise it’s not fair. More importantly, it’s unjust.
There are many reasons why foreign aid and handouts do not succeed in lifting anybody out of poverty, but one of the main reasons is that progress requires effort. Sadly, there is no effort involved in being the recipient of a handout.
Capitalist free markets do not create a situation where everyone has the same amount of stuff. Sadly, progress yields unequal outcomes. Enter the welfare state, a creature of most modern capitalist economies. The idea is that taxes will be collected to create a repository of public funds to provide a safety-net for the poorest and most vulnerable in society. Thus the welfare state would be expected to meet the costs of unemployment insurance and pensions for those who found themselves cast on the heap when the company they worked for goes bust.
In Capitalism and Freedom Friedman tries, although without much success judging by the state of things today, to challenge us to think about the meaning of 'equality' in the context of work and pay. Something a bit more sophisticated than 'having the same amount of stuff' or 'paying everyone the same wage'.
Within the framework of private law, where individuals are largely self-governing subject to the basic principles of the law of obligations (contract, property, and tort) the law has nothing to say about whether everyone should have the same amount of stuff or even the same amount of social standing or economic power.
This is the time of year when everybody resolves to be good, to be a better person than they were last year, and to generally be nice to everyone. Most people are good people, or at least they want to be thought of as good people who do what they can to help others out of the kindness of their own heart.
As Christmas approaches, 'tis the season to reflect on Mr Scrooge and his infamous modern-day successors. Many greedy capitalists have achieved notoriety in our time but as we enter the season of goodwill to all men our focus turns to other greedy capitalists who, like Mr Scrooge, turn themselves around and do the right thing in the end by giving lots of money to help the less fortunate.