The Discontents of Capitalism

“Why, in fact, do we feel compelled to ask if capitalism is failing? Why do we wonder if capitalism is moral? Why do 57% of respondents in an Edelman Trust Barometer survey believe that ‘capitalism as it exists today does more harm than good in the world?'”

Editor’s note: This is the third in a series of short essays by Merion West contributing editor Jonathan Church exploring the idea of capitalism, as practiced today in the United States.

Capitalism, whatever it is, is deservedly recognized as a dynamic economic system that rewards the kind of innovative enterprise that has spawned substantial improvements in material living standards over time. If we assume—probably correctly, though the counterfactual eludes us—that advances in the material conditions of life in the last few centuries would be absent (or noticeably attenuated) without the emergence of a capitalist way of life, it would be foolish to believe that we cannot learn from, and should not seek to preserve, what it is about a capitalist way of life—business, profit, and so on—that tends to generate such remarkable innovation and material prosperity.

After all, we presumably would refuse, if asked, to abandon a world in which electricity, refrigerators, indoor plumbing, automobiles, air planes, computers, the Internet, and innumerable other accommodations of modern life are taken for granted. Even ascetic folk, with their predilection for a minimalist lifestyle and indifference to extravagance or convenience, can appreciate that communism lost the Cold War and that markets, money, and the mayhem of speculative finance have a useful role in getting resources to where they are needed, or at least wanted.

In the same vein, it would be counterproductive to cast aside the insights of Adam Smith—the intellectual forefather of laissez-faire capitalism—in a cavalier belief that neoclassical economics, to which The Wealth of Nations gave birth, is merely ideological. It may be that no one solves calculus problems to figure out what they should buy when shopping on Amazon. We may grin ironically when the authors of a textbook on Chicago price theory, a quintessential exegesis of free market economics, acknowledge that “it turned out that people’s expectations (about the housing market prior to it 2007-08 collapse) were wrong relative to what happened” but then insist (with a straight face) that the question we must ask is: “were people wrong about what could have happened?” Nevertheless, the material benefits of capitalism do not give us reason to deny that modern economic theory is a significant advance in our understanding of efficient resource allocation.