Remember that popular kid who peaked at 17 years old? The one who was the center of the universe for a while, only to be the uncool has-been six months later?
Capitalism is that kid.
In the 20th century, capitalism was admired and talked about everywhere. Economists wrote books of appreciation to it, and politicians like Margaret Thatcher put it to work with formidable success.
The fall of the Soviet Union, the world’s most expansive socialist experiment, became the crown jewel of the capitalist century.
That was then. Today, in the third year of the third decade of the new century, capitalism seems to have many more critics than friends. Those who still hang out with the formerly popular kids offer almost pitiful apologies for their company.
Given the generosity with which its critics voice their views, one cannot help but wonder if capitalism has committed some cardinal sin. It hasn’t, of course; its accomplishments remain undeniable, having in two short centuries brought humanity to unprecedented levels of prosperity.
Very few critics deny capitalist success on the economic front. Their objections tend to follow a different path: what capitalism delivers in terms of prosperity, it fails to deliver in terms of other values. Material wealth is one thing; spiritual health another.
But is capitalism really to blame for the shortcomings it is being accused of? Do its critics really understand capitalism?
Capitalism and climate change
Generally speaking, contemporary critique of capitalism falls into four categories: ideological, environmental, introspective, and moral.
We can safely disregard the first category: ideologues who dislike capitalism, do so because it is not socialism. A mutual-exclusion objection to capitalism is worth a debate, but only when it sheds an equally merciless spotlight on the alternative.
Environmentally-based critics tend to base their arguments on an implicit, sometimes explicit, premise that capitalism has caused environmental destruction. This is not true; socialist countries, both old and new, are just as destructive to the environment as any other.
More importantly, though: capitalism as an economic and political system is not designed to be either favorable or unfavorable to the environment. Its central tenets tell us how to organize economic activity in a way that is of maximum benefit to humankind, according to a well-defined but narrow concept of ‘benefit.’
As we will see in a moment, the narrow nature of that concept is deliberate, even intrinsic, to capitalism as a system. Yet there is a fair amount of literature out there that tries to expand on the ‘benefit’ concept in order to make capitalism more virtuous from a ‘green’ viewpoint. Focus is often on so-called climate change, with the goal of creating mechanisms to harness capitalism for a higher purpose.
A representative example comes from economist Graciela Chichilnisky with Columbia University (“Green Capitalism,” Journal of International Affairs, Winter 2020). She suggests that the world’s governments be made to subject all productive economic resources to ‘green’ central planning.
Superficially, Chichilnisky wants to incentivize economic activity that is ‘carbon neutral’ or even ‘carbon negative.’ In reality, she proposes to de facto replace capitalism with a form of central economic planning. True to Marxist theory, Chichilnisky wants to replace the market-based value system of capitalism with an artificial value system.
The practical meaning of this value-theory replacement is as follows. Under capitalism, economic value is determined by how much goods, services, capital, and labor sell for on a free market. Under Marxism, all value is measured by way of how much labor was used to produce it. In Chichilnisky’s carbon-neutral economy, value is determined by how much or how little carbon dioxide is used to produce one unit of value.
Chichilnisky herself tries to make the argument that she is just amending capitalism with a ‘green’ value-measurement method. Her argument is based on an elementary misunderstanding of the concept of gross domestic product, but even if we disregard that error, she makes the same mistake as most ‘green’ modifiers of capitalism do. She introduces a parallel pricing system for all resources produced and consumed in the economy. As per experience from failed central economic planning in the last century, capitalist values (again, determined by free-market prices) cannot coexist with values forced upon the economy by government.
Either the government system collapses under its own weight, or capitalism crumbles and the very machine that creates prosperity slowly grinds to a halt.
The introspective critic of capitalism is not out to modify capitalism, but to purify it. The concept in focus is ‘cronyism,’ used first and foremost by libertarians and economists of the Austrian school. When rid of cronyism, the distilled form of ‘anarcho-capitalism’ will emerge as the ultimate victor.
Walter E. Block, economist with Loyola University of New Orleans, is a strident anarcho-capitalist. He recently penned an article for the Independent Review explaining that “crony capitalism is high up on the list” of the phenomena that hold back human liberty and prosperity.
In a nutshell, cronyism is a practice where capitalists use contacts in government to increase the profitability of their own businesses, independently of how their businesses perform in free competition. Crony methods can consist of tax breaks and subsidies that are specific to a particular business or to one industry over others, but they can also be regulatory measures that disadvantage the crony capitalist’s competitors.
There is no doubt that cronyism distorts the forces of the free market, nor is there any doubt that the distortion is deliberate. The cronyist wants to weaken the very core of the free-market economy, namely free and fair competition. On this point, Walter Block and other Austrian-theory economists are perfectly right.
What they are not right about is the remedy. The cure for cronyism is not to unleash anarcho-capitalism in all its glory. This idea is based on the notion that cronyism is a government-only phenomenon. If unfettered by government, capitalism will produce perennial growth, prosperity, and freedom.
This is not true, and the proof is found inside capitalism itself, specifically within the concept of ‘profit.’ To get there, though, we first need to review the last category of capitalist critique.
In his thoughtful essay Dark Night of the World Soul, Jonathan Culbreath describes capitalism as a process of constant transformation of human society. Capitalism, he explains,
continues to impose upon the collective psyche an experience of such unending, constant change, that change itself now appears to be utterly monotonous. So far have we come in the development of capitalist productive forces that the very possibility for change, the possibility of a revolutionary transformation of the whole social order, seems to have been absorbed into the system itself. We are stuck in a seemingly never-ending process of change.
This process is a nihilistic ‘coming to nothing’ journey, where change happens almost for the sake of change itself.
This is a blunt critique of the very socio-economic organization of Western civilization, a critique that strictly speaking places its crosshairs beside capitalism itself. However, the phenomenon that Culbreath observes—nihilism—is causally tied to the very core of capitalism.
In his eloquent brutality, Culbreath captures the one essential weakness of which capitalism can indeed be rightfully accused: its lack of higher values.
Capitalism is centered around one concept: profit. Its individual iteration varies depending on where we are in the economy: to the career professional, it is the higher salary that leaves more money in the bank after all the bills are paid; to the consumer, it is the value of a better home, tastier food, a higher-quality family vacation.
To the capitalist, the profit is the net return on a good investment. And, of course, to the entrepreneur, the profit is the net between sales revenue and production costs.
Profit is simple, tangible, apparent—and nothing more than that. The profit motive encourages people to work harder, do more with less, to take risks, and explore new opportunities. It drives the engineer to develop new, innovative solutions to old problems; the business owner to try to meet hitherto unsatisfied human needs.
This is the capitalism that Walter Block celebrates, and rightly so. But with equal right, Jonathan Culbreath points out that capitalism is nothing more than the profit motive. His critique even goes a step further: the more the profit motive dominates our daily lives, the more of nothing else our lives contain.
It is in the contrast between these two views of the profit motive that we find the essence of the moral critique of capitalism. The anarcho-capitalist believes that the pure pursuit of profit is intrinsically good; the profit motive can co-exist peacefully with intangible values of a higher nature.
Yet as Culbreath points out, that is not the case. As the profit motive expands its presence in our lives, our society grows more nihilistic.
This is not the fault of capitalism itself. Capitalism does not destroy other values, nor does it come without respectable merits. Quite the contrary: the profit motive has elevated human existence to unprecedented levels. We can feed more mouths, cure more of the sick, educate and elevate more people than we have ever been able to do.
The problem lies instead in the fallibility of human nature. One man’s pursuit of profits is driven by a benevolent purpose. However, in absence of higher moral values, the profit motive expands beyond its proper confinements. As it does, it encourages activities that boost profits even at the expense of other values.
Cronyism is a case in point. Our desire to make more profits drives us to ‘cheat the system’ by manipulating the very rules by which the game is played. This immoral penchant for rule-bending is not limited to government: it extends to the private sector and the free market as well.
As the capitalist grows his business, his market share, and his profit, he begins using his power and influence more generally. He solidifies his position, be it through government or in the private sector. He forms cartels to boost profits, integrates his business vertically, and buys up critical resources in an attempt to monopolize-away competition.
This practice is very common in capitalist economies. Walter Block, the anarcho-capitalist, pays token attention to the problem in his article, but views private-sector cronyism as an exception to an otherwise well-working free-market economy. This is not the case, especially in a world where the human mind—as per Culbreath’s reasoning—becomes so preoccupied with profits that it closes itself to other values.
When this happens, moral barriers that can prevent profit-seeking immorality, no longer exist. Actions that ultimately harm human society, such as the unlimited accumulation of wealth and power in the hands of very few men and women, gain moral value because they further the profit motive.
God as a limit on profits
The pursuit of profits is quintessential to the elevation of the human experience, from abject poverty to unprecedented prosperity. Yet capitalism and profits cannot—and should not be allowed to—do anything more than that for us.
It lies in our very nature to search for more, to fuel that search with something other than profits. We must fill it with our need for God. It is the journey to a better service to God that fills the nothingness that Culbreath so concisely identifies.
We strive all our lives to grow spiritually. The pursuit of profits elevates our material existence; we can never grow spiritually from it. The only way to rise farther, to reach for a limit in an endless universe, is to pursue our relationship to God.
God, and only God, can teach us the limits of the profit motive. In doing so, he also teaches us how to truly harness the virtues of capitalism.