The morality of capitalism

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. 

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.

​Greedy: Having or showing an intense and selfish desire for wealth or power

OED
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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?

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 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.

It is not just captains of industry or heroes of Ayn Rand novels who define themselves through their accomplishments in the economic realm. Many ordinary people - middle-class parents, single mothers, entry-level workers, small-scale entrepreneurs in the developing world - become who they are and express who they hope to be by the personal choices they make regarding work, saving, and spending.

Tomasi, 'The Moral Case for Economic Liberty' in the Index of Economic Freedom (Heritage Foundation, 2014), 59
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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.

To be sure, a human being is a finite thing, and his freedom is restricted. It is not freedom from conditions, but it is freedom to take a stand towards the conditions.

Victor Frankl, Man's Search for Meaning, 132.
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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.

Possessing some particular bundle of material goods, from this perspective, becomes more meaningful if one possesses that bundle because of one's own actions and choices. Diminishing personal agency in economic affairs - no matter how lofty the social goal - may drain vital blood from a person's life. When private economic freedoms are curtailed, people become in some important sense less free.

Tomasi, 'The Moral Case for Economic Liberty' in the Index of Economic Freedom, 60
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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. In order to take action to improve your own conditions you need economic freedom.

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 pursue that dream.