Capitalism, as defined by Milton Friedman in Capitalism and Freedom, 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.
Friedman's definition, which depicts capitalism as a route to freedom, is the only feasible starting point for a moral inquiry. After all, if you start with Karl Marx's definition of capitalism as 'the restless never-ending process of profit-making alone...boundless greed after riches' then you're obviously not going to waste time on a moral inquiry. Nobody wants to live in a society where everybody's goal in life is to be as greedy as possible.
Even if you start by defining capitalism as freedom, you still have a problem. Can freedom be defended on moral grounds, if it produces unequal outcomes? Or do we only want freedom if it comes with inbuilt guarantees that all the free people are going to end up with an equal amount of stuff?
Life, liberty, the pursuit of happiness, and a guarantee of economic equality for everyone...is this the dream?
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 obtuse things like 'let them eat cake'. But in the sense defined by Friedman, the capitalist is not necessarily a person who is wealthier than other people, sitting on top of a pile of money. A 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 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. Very few people can trace their family wealth back to the dawn of time because their bloodline runs back to Plutus himself. Such cases are therefore 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. In order to take action to improve your own conditions you need economic freedom: freedom to make your own choices about the productive activities that are meaningful for you to pursue.
Economic freedom is what allows people to improve their lot in life. Freedom is much more valuable than just being 'free' to dine at the Ritz - it is also about freedom to have a dream because you know that you have some scope (no matter how constrained by circumstances) to be able to strive towards your goals, to pursue your dreams, and to be fully human.
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