The Ethics of Capitalism

September 20, 1948

The “Christian Church,” concluded the original draft of a report to the World Council of Churches, “should reject the ideologies of both Communism and capitalism, and should seek to draw men away from the false assumption that these are the only alternatives.”

The implication of this sentence is that Communism and capitalism are about on a par as major evils. But the means of production must either be owned by private individuals, which is capitalism, or by the state, which is Communism or socialism. Dr. John C. Bennett, who drafted this plague-on-both-your-houses, has admitted that British “democratic socialism” comes closest to what he had in mind as the undisclosed Third Way, the “new creative solution.”

Now the belief that we can have socialism and still retain human liberty and avert state despotism has proved to be the great delusion of the present age. For when the state controls everyone’s means of livelihood, it inevitably uses this power to suppress freedom of speech. It is naive to suppose that the individual will in fact be free to criticize the rulers who can decide what job he will take or whether he can have a job at all.

The Stalins and Titos have in fact used such power not merely to suppress all criticism but to compel the most abject and nauseating flattery. But Communism is merely the name for what happens when socialism becomes complete, or nearly so. Liberty shrinks in direct proportion as socialism advances.

As a result of protests, the final version of the report to the World Council of Churches put the modifier “laissez-faire” in front of “capitalism”—but apparently only in the sentence I have quoted. It is difficult to measure the precise effect of this change. Much depends upon the interpretation of “laissez-faire.” It has long been used as little more than a term of abuse, synonymous with anarchy. Only the unregenerate and depraved are thought still to believe in it. When used by the classical economists, however, the phrase presupposed a framework of law and order, under which the state illegalized force, theft, fraud and the breaking of contractual promises, but otherwise permitted free markets and refrained from detailed economic restrictionism.

To reject “laissez-faire capitalism,” therefore, is by implication to reject free markets and presumably to endorse some sort of state “planning.” This euphemism for collectivist coercions and compulsions ought by now to have been sufficiently discredited by what is happening in England, France, and a score of other countries, where the collapse of state planning has led to increasing dependence on capitalist America, to chronic shortages, black markets, and moral cynicism.

A churchman remains within his spiritual province as long as he criticizes economic systems purely on ethical grounds. But he cannot competently do this unless he really understands the economic system he is presuming to judge. And this understanding requires more arduous study than the authors of the World Council of Churches report appear to have devoted to it.

What, for example, is “justice” in an economic system? Is it the equalization of rewards regardless of the contribution that anyone makes or fails to make to the social product? To many of us a system under which the talented and skilled and industrious received no more than the incompetent and shiftless and lazy, and which equalized rewards irrespective of effort, would be not only unjust but, what is worse, unproductive. Most of us, if we thought that were the only alternative, would prefer an enormously productive if not ideally just system to one which provided a perfectly “just” distribution of scarcity and poverty.

Fortunately, a free capitalism not only provides both more liberty and welfare than any other system, but more economic justice. Under it most of us, in spite of exceptions, get approximately the economic value that we ourselves contribute to the total social product. That is how the system provides incentives. Keep improving it, certainly; but don’t “reject” it.