Capitalism Is Not The Morally Best Economic System

This essay will argue that capitalism is not the morally best economic system as a result of the systems unfairness, lack of concern for welfare and limitations on one’s freedom. The specific identification on capitalism’s efficiency and inefficiencies including, the role of private property rights, exploration and one’s moral obligation to support those in need will be discussed. The invisible hand argument will also be challenged by identify the failures associated with this theory as well as the libertarian argument. These characteristics of capitalism will be compared to those of socialism and a mixed economy, which will lead to a conclusion on a capitalistic economy’s morality and inefficiency’s.

In order to evaluate capitalism’s morality- fairness, welfare and freedom of individuals in the economic system must be considered. Firstly, an economic system does not come with an inherit set of moral standards for which individuals can follow, often situations and one’s standards lead to certain moral standards. For example, capitalism allows for the freedom to invent and produce goods and services, which then allows for a greater access to goods and services due to market forces. The access in the free market gives individuals the freedom to let them use their talents and abilities to fulfil the interests of consumers, thus achieving their own success and generating profits. The invisible hand theory argues in favour of capitalism. This is the market forces playing their natural course, allowing for supply and demand to come to an equilibrium that suits both the producer and supplier. This is productive efficiency. Due to the change in consumer preferences prices of goods or services changes, these changes cause businesses to enter or leave the market due to the competitive prices (Winfield et al, 2014:75). This results in high volumes of productions at low cost, and high maximum satisfaction, which achieves allocative efficiency (Winfield et al, 2014:74) Allocative efficacy and productive efficacy achieves a capitalism economy that is economically efficient (Winfield et al, 2014:74). This efficient economy keeps costs kept low due to competition and resources do not get wasted as appropriate production decisions are made to produce goods demanded. Overall, this has the ability to improve one’s standard of living and is the best system for wealth creation. Individuals in businesses have moral obligations including respecting the rights of other individuals, which includes honouring contracts, promises to the community and not engaging in fraud and so on (Younkins, 1998). Capitalism can be regarded as moral as it rewards people’s hard work, regardless of one’s birth, because the extent to which someone succeeds or fails in society is determined by ones abilities (Thompson, 1993). As a result of ones abilities, wealth is a reward for moral behaviour in a capitalism economic system.

However, often there are selfish or greedy individuals or businesses, who are so fixated on maximising profits. These individuals take part in immoral acts such as monopolistic behaviour, price fixing or exploiting workers by demanding long labour intensive hours and paying a less than fair wage, which is not enough to get by. As a result, a small portion of owners and their family members’ lives are improved but the majority are workers left poor and dissatisfied. In this case efficacy in the economy does not mean there is happiness in the society. The labourers are the ones who actually create the wealth for their employers by manufacturing the goods or services. Without them, there would be no capital to gain. In capitalistic economy there are no regulations to stop these kind of immoral actions. The welfare of individuals is one’s own concern, and not the state nor businesses. The government has minimal influence, if any, in a capitalistic economy. This leads to an efficient but unequal economy. This means that if someone does not have the ability take part in the business environment as an entrepreneur or a worker due to disability or illness, they will suffer. They become trapped in cycle of poverty (Winfield et al, 2014:82). However, in a socialist economy, it is believed that it is a moral obligation to protect the welfare of individuals.

Socialism is driven by government intervention. The government redistributes wealth in the form of public health care, housing, public education, certain amount of goods and services and so on. This is done by high tax rates on individuals. Since all individuals are taken care of and the system does not rely on talent nor productivity – a lack of incentive to work is a result and leads to no further innovation in technology and poor quality of goods and services. This is a major problem in socialism- since governments are focused on the welfare of citizens, they struggle with economic decisions resulting in an economy that does not develop. Socialism is thus regarded as an inefficient economy. Using the above argument one can see that it may be moral to take care of those in need, however capitalism focuses on the right to freedom and choices, therefore it cannot be moral to have one’s wealth lowered to a level of another for someone else’s benefit. This requires sacrificing your own interest for the sake of others. It may be argued that if someone is in need and cannot through the use of their abilities increase their own wealth, they require some financial assistance. If someone is idle or uninterested and is waiting for support from the state when they have the ability to work leads to the conclusion that socialism would be regarded as rewarding idleness and penalizes hard work, where capitalism rewards hard work and penalises idleness in order to be a productive member of society (Durden, 2016).

A reward or more accurately a right of a capitalism economy is private property rights, with minimal regulation. The regulations are there to resolve minor disputes. These property rights can result in inequality as you may pass your land down to family members, which gives them an advantage in life, as they can sell it or rent it to other people. By renting, individuals can increases their wealth with minimal effort. The libertarian argument states that it is immoral to violate private property rights, even the interference by government could be used to help a starving person or develop infrastructure (Winfield et al, 2014:70). Libertarians strongly believe that by taking away their private property rights their right to live how they choose is being denied. The libertarian argument is a deontology argument, which states that it does not matter if someone is starving it’s still their right or duty to own property (Winfield et al, 2014:73). This argument is challenged by questioning if individuals private property are really there’s to begin with and if there means of acquisition were just (Winfield et al, 2014, 71). There is also the issue that there are many resources that have social origins and one cannot claim something that someone else a right too as well (Winfield et al, 2014:71). A consequences would argue that it is immoral and irrational to protect private property rights and leave someone to starve (Winfield et al, 2014:73). In a socialist economy, there are no or minimal private property rights, as the state controls all property. This enables everyone to have access to everything they need including housing, but they cannot leave anything of great wealth to their children or family members, if they pass away.

Capitalism can be regarded as an inefficient economy due to market failures including the above mention monopolies as well as oligopolies. As a result of these inefficiencies prices are high resulting in abnormally high profits, which benefits the owners. New businesses are unable to enter the market as they cannot produce goods at low costs like the bigger firms can due to the firm’s ability to make use of economies of scale (Winfield et al, 2014:76). These new businesses fail and they lose their capital. As a result, capitalism is more about self-interest, than caring for others. This self-interest results in inequalities including asymmetric information, underemployment of resources and the tragedy of the commons (Winfield et al, 2014:78).

As a result of the inefficiencies and issues that arise in both capitalism and socialism, the mixed economy is established. The mixed economy allows for market forces to play its course, allowing the right to choose as well as including regulations in place to minimise social injustices such as exploitation. In this economy there are minimum wages in place, public goods available, and laws regarding pollution and company acts, the protection of private property rights as well as a variety of taxes- of which are collected in order for the government to care for the welfare of individuals. As a result the best of socialism and capitalism is emphasised by excluding the negatives associated with them (Winfield et al, 2014:89). The welfare of society is also protected. By reducing the inequality gap in capitalism, the happiness of society increases. When happiness increases productively increases. This then leads to an efficient economic system with a satisfied society. For these reasons the mixed economy is a moral economic system.

Although capitalism allows for the freedom for people to choose and protects private property rights, it cannot be a moral economic system. Individuals can by their own means establish profitable businesses, however due to the greed of some individuals, who have taken advantage of the free market, capitalism leads to immoral acts such as exploitation of labourers due to the lack of regulations. It is immoral and unfair to let people suffer, particularly when the wealthy can assist and support those in need. Although the invisible hand theory and the libertarian argument both embrace capitalism they both are weak arguments that can easily be challenged. Therefore, although capitalism is economically efficient, the welfare of individuals and the happiness of society outweighs the greed and immoral acts in a capitalism economy. A more suited economic system would be a mixed economy. This economy includes the benefits of both capitalisms protection of private property rights and a free market, while including regulations to protect society and socialisms necessity to care for the welfare of individuals, and its concerned for the happiness of society. For these reasons, capitalism is not the morally best economic system.

References

1. Durden, T. 2016. Socialism Is An Immoral System. Available: https://www.zerohedge.com/news/2016-05-12/socialism-immoral-system [2019, March 08].
2. Thompson, C. 1993. Socialism vs. Capitalism: Which is the Moral System- Ashbrook. Available: https://ashbrook.org/publications/onprin-v1n3-thompson/ [2019, March 08].
3. Winfield, J., Hull, G. & Fried, G. 2014. Business ethics & other paradoxes. Cape Town: Fairest Cape Press (Pty) Ltd, pp.61-89.
4. Younkins, E. 1998. Capitalism and Morality. Available: http://webcache.googleusercontent.com/search?q=cache:http://www.quebecoislibre.org younkins21.html [2019, March 08].