Moral Capitalism: An Oxymoron?

Capitalism is in crisis. Or rather, it should be. Somehow it has deflected the ire of politicians, or maybe Westminster has avoided having revolutionaries in its ranks. Instead of seeing a call for more regulation, there are calls for less regulation; instead of the state stepping in to protect the citizen from the crisis, privatisation is called for. Capitalism has gone from having its quirks to being ravenously dangerous. But a solution is coming from Westminster, we must be quiet to hear it (it has to whisper lest the markets hear it). Ed Miliband is calling for more responsible capitalism and an end to “bad” capitalism, and even more remarkably David Cameron also calls for more responsible and ‘moral’ capitalism. But is it actually possible for capitalism to be ‘moral’?

Change is afoot; capitalism will now be ‘moral’. That rather suggests that the capitalism circa 1979-2012 was ‘immoral’, so for there to be a change the vices of the old regime need to be cleansed. The anger is aimed towards the greed, the recklessness, the disregard for the majority – yes, these must be vanquished, then we will have ‘good’ and ‘moral’ capitalism.

But therein lies the problem; these vices are what makes capitalism work, and any rules to change them requires state regulation (shudder). There are two fundamental principles to a capitalist economy; profit as an incentive and the notion of supply and demand. Both of these are so central to capitalist theory that to change them would mean to overhaul the capitalist system. One cannot separate the moral deficiency of capitalism from capitalism.

The idea that profit is the only incentive of man is the main moral basis of capitalism; nothing is worth doing unless one profits. This is a pessimistic analysis of human nature suggesting that man is inherently greedy and egoistic, an analysis most famously seen in Thomas Hobbes. Milton Friedman suggested this insight was sharpened with Adam Smith in the Wealth of Nations. In reality, Friedman misread Smith as in the Theory of Moral Sentiment Smith claimed that man had an innate conscience telling him to help the poor and give aid. This fundamental principle of capitalism praises greed and self-interest, or as apologists call it “individualism”, which leads to innovation and competition which improves prices for customers; everyone wins by people looking after their own interests. The flaw is; this analysis is wrong.

Profit is not always an incentive for action, particularly financial profit. Social responsibility, duty, decency, compassion and benevolence are all not only ignored but repulsed; such things cost money. Paying more to the farmers and workers increases the wage roll and thus lowers profit – thus there is no incentive for the board to pay a fair wage. Schopenhauer outlined three basic motives for action; compassion, malice and egoism.

But this moral theory is more than just a flawed analysis; it is an ideal. Man should be an individual looking after his own interest; let other people look after themselves. People are where they are through their own actions; the poor are poor because they did not try, those on state aid are dis-incentivised to get their life together. This inherently internal focused morality begets greed and egoism.

Karl Popper answered this objection to capitalism by pointing out that individualism and egoism need not coincide with each other, and that individualism and altruism are not opposites. He attacks Plato’s work and the works it inspired by equalling collectivism with altruism; the two run similar rhetoric. Is it possible to run an altruistic individualistic ethic? Not when there’s financial incentive in egoism, which is the behaviour capitalism breeds and needs.   

All ethics is an emulation of some sort of ideal role model. So what are the virtues of the ethical eudaimon of capitalism? Ambition, entrepreneurship, individualism, innovation and freedom. But this creates a problem; not everyone can be an entrepreneur, not everyone can run their own business – there needs to be a consumer class, and what are their virtues? In a capitalist society, they are greed and jealousy.

Where the consumer comes into the capitalist equation is with supply and demand. Demand means it is necessary to put the consumer in need; they are required to want, to be greedy and to demand at all costs. If people cannot afford things and do not consume, they are economically useless. This economic outlook transcends down so that socially they are useless. The capitalism society which a capitalist economy needs must be individualist in order for people to consume more, and more, and more, and then give them a credit card so they can consume some more. Capitalism requires consumers to have an insatiable demand for more. Or as Thorstein Veblen put it in Conspicious Consumption; “Unproductive consumption of goods is honourable”.

To sum up the ethics of capitalism; “greed is good” (Gordon Gekko). Capitalism needs greed, it needs people incentivised by their own financial gain to expand enterprises and create jobs and economic growth, and meanwhile it needs consumers to be greedy and insatiable for more goods. “The one who dies with the most toys wins” as an American bumper sticker said (un-ironically, unfortunately).

Is this really a good basis for society? There are very, very few idealistic ethical theories that suggest greed is a virtue (Ayn Rand is the eccentric exception, though Nietzsche comes close). Most people would argue that greed and egoism are not healthy; and yet here we are. Somehow in a system that needs the greed of individuals to survive. Even if one accepts that man is naturally greedy, surely that is a deficiency to overcome. But rather than being a human deficiency to overcome, capitalism just accepts it; man is greedy so deal with it.

Morality is subjective and does not really exist (we can get into a great metaphysical debate about what I mean by “is”, but that’s a different story). Some people believe capitalism is already “moral”, many don’t, and they both use the same argument; freedom. The neo-liberal perspective of freedom means the freedom of trade and of enterprise, the freedom from government intervention and the freedom to do what you want. The social democratic perspective of freedom is more like Franklin Roosevelt’s four freedoms; particularly the freedom from want and freedom from fear (the freedom from the fear of losing one’s job). On the one hand, to make capitalism “moral” it is necessary to change the ethics of capitalism, which would require regulation, and at the same time it is necessary to establish a definition of a “free society” to be idealised and attained.

To make capitalism moral means rewriting the rules – or actually establishing and enforcing the rules. This means regulation; the problem is that capitalists hate regulation and state interference; it’s inconvenient to pay minimum wage or follow health and safety guidance while competitors in India and China don’t. How dare the democratically elected government protect worker’s dignity and rights. Either this regulation must be international (flat out impossible), or the market must be restricted and shut off – either the British market or the European market. In either case, international free markets cannot be moral while different standards of what is ‘right’ and ‘responsible’ exist.

Can capitalism be moral? Only by massively changing it; more regulation, more limits, a shift in focus from shareholders to stakeholders, a tie between social responsibility and financial rewards, protectionism of responsible companies from financially successful ones, incentivise altruism, shift the focus from growth to jobs, moderation, a no nonsense approach to tax dodgers and an end to speculation. In short; ‘ordoliberalism’. Capitalism is more than an economic theory; it is a political and social theory as well and so it needs to start acting more responsible for the social and political implications. A moral capitalism will look very different to current capitalism.