Ryan Dahlgren

Prof. Jenkins
Morality of Capitalism
December 8, 2016

Is there a moral basis for capitalism? This is one of the most pressing philosophical

questions of our day. Depending on whom you refer when looking through economic texts will

shape and change your opinion on the question. Scholars have both praised and critiqued this fast

paced economic system which favors boldness, ingenuity, and creativity to constantly progress

both the bottom line of each capitalist as well as the policies politicians push for and filibuster

against. Capitalism is one of the newest and most progressive forms of economic systems in

existence and has led to some of the greatest advancements in human history. While there has

been great progress stem from capitalism, there has also been great calamity and negative side

effects. To properly answer the question at hand, one must summarize the question as to ask:

Does capitalism reward moral or immoral behavior more? When looking at the question through

this scope, it is clear to me through evidence presented that there is no moral basis for capitalism.

To fully understand the reasoning behind this a person has to both understand morality as

well as capitalism. Morality is described by the Oxford Dictionary as: Principles concerning the

distinction between right and wrong or good and bad behavior; a particular system of values and

principles of conduct; the extent to which an action is right or wrong. Some believe morals come

from their religion and/or a deity, but when religion and tradition are removed, we have a more

fundamental basis for morality, one which isnt perspective based but grounded in reality. This

form of morality refers to a code of conduct that would be accepted by anyone who meets

certain intellectual and volitional conditions, almost always including the condition of being
2

rational. (Gert, 2002) For something to be moral it must be an accepted standard which the

overwhelming majority of humanity understand, accept, and agree with.

Capitalism is described by the Oxford dictionary as, An economic and political system

in which a country's trade and industry are controlled by private owners for profit, rather than by

the state. This concept that people should control their own destiny, instead of being ordered

around or controlled by a higher or more forceful power, seems commonplace now but hundreds

of years ago this was not so. Adam Smith is credited with the popularity and rise of capitalism

due in large part by his most famous work, The Wealth of Nations. In The Wealth of Nations,

Smith argues many points which are still applicable today, including specialization, which helped

start the Industrial Revolution, the role government should play in business, and the various

types of people which make up the system including: workers, landowners, and capitalists. While

this book was written well over 200 years ago, it is important to note that Smith understood the

potential for misuse of capitalism, and some of these issues are being exploited today.

Karl Marx was one of the most vocal advocates against capitalism. Marxs critique is by

far the most well-known argument against capitalism and it raises a number of discussion worthy

points. The first of these being that Marx believed that capitalism was just a stage which

humanity would eventually evolve from into socialism and eventually classless communism. It is

important to note that Marx believed in revolution to usurp the capitalist governments in place.

There are other scholars who believe peaceful change could occur to create democratic

socialism, an idea which is gaining more traction in the United States. A revolution is not likely

to occur, however Bernie Sanders was a vocal advocate of social reform to tone back capitalism,

and many people wish to see this message in practice. Could this be the progression Karl Marx

had envisioned? Unlikely, but the growing trend in both America and Europe towards more
3

collectivist societies is important to note. Marx goes on to discuss the relationship he believes

exists between capital and people, which is really just a relationship of people who own capital

and those who do not. This is something which Marx nails. People create relationships with other

people, not with capital. The relationships which are made due to capital are what Marx believed

would cause controversy. He believed that the friction of owner-worker created disparity which

would allow capitalists to take advantage of workers. The more capital a person has, the more

power they exert, and the more power they exert the more able they are to take advantage of

people and consequently the law.

Difference in class would continue to grow in Marxs assumption, and this would

eventually escalate to the point that working class people would have so little power or influence

that they would have no better alternative than to revolt. This isnt likely to happen in America

anytime soon, but it is true that there is a growing disparity between those who are rich and those

who own very little. Even those people who are considered part of the upper-middle class find

themselves growing less and less each year while the uber-rich grow rapidly. (Fry, 2014)

Supporters of Marx go on to argue that it is a contradiction-laden system, which systematically

grows towards greater and greater calamity. There have been recessions and depressions in

Americas capitalistic history, the most recent having come in 2009. This housing market crash is

a perfect example of the calamity capitalists help to create when left unregulated. A recent 2015

study in the Cambridge Journal of Economics examined the similarities of the economic

situation in the 1920s leading up to the Great Depression and the economy and ongoing of it

leading up to the Great Recession in 2009. It is interesting to find out that much of what was

learned and discussed economically as a result of the Depression started to go away in the late

1980s and early 90s allowing for a similar situation to form. The difference in outcome between
4

the two was the fact that there were regulations and fail-safes in place to make sure a Depression

of similar magnitude wouldnt happen again.

Marx and his supporters viewed capitalism as a system where the rich would continue to

get richer and the poor would get poorer. In The Pew Research Centers 2014 study on the

wealth gap between median house owners and upper-income families it was found that only

upper income families had grown in median net worth in the last 30 years. Another study by Pew

showed that wealth and wage gaps between the richest people in America, and the average

Americans is the greatest its been since 1928. Not only this, but the United States gap is also

higher than most other developed nations (10th of 31). It should now be seen that Marx was right

when discussing disparity in income of the wealthy and poor and how it would grow. Marx did

not believe people would act in what Smith refers to as rational-self-interest. This is the idea that

when applying average human rationality to all people, they would act and behave in a manner

which would be close to the Golden Rule. While this is an optimistic view of human nature,

Marx disagreed and believed rational self-interest over time would lead to greed. Its not hard to

look around and find crooked CEOs, bankers, or investors, and this is apparent quite often when

turning on the news. Wells Fargo was recently under heat for forging numerous fake accounts

under peoples names, and it would be hard to argue that the owner used rational self-interest

when Okaying this.

Capitalism is relatively new in human history and it has been shaped and developed by a

number of different factors, one of these being Charles Darwins theory of evolution and the

survival of the fittest. Social Darwinism was an idea thought up and popularized by Herbert

Spencer in the second half of the 19th century and was used as reasoning for imperialism,

territoriality, and Manifest Destiny.

5

Social Darwinists argued that individuals and groups, just like plants and animals,

competed with one another for success in life. They used this assertion to justify the

status quo by claiming that the individuals or groups of individuals at the top of social,

economic, or political hierarchies belonged there, as they had competed against others

and had proven themselves best adapted. Any social or political intervention that

weakened the existing hierarchy, they argued, would undermine the natural order.

(Schlager, 2001)

This idea was largely popularized during the Gilded Age, a time where great expansion

and racism existed, and the idea of Social Darwinism helped promote these. Americans sense of

Manifest Destiny helped them conquer the west, but in the process destroy entire nations of

people who were deemed lesser. According to Social Darwinism, these people were simply not

cut out to be successful and were therefore persecuted in the process. Social Darwinism has

largely been discredited over time, but it is an important idea to note in the discussion of

capitalism, because many capitalists of the time used Social Darwinism as the excuse for treating

migrants and minorities poorly.

Social Darwinism wasnt the only happening of the Gilded Age related to capitalism. In

fact, as great as the wage gap is today, there was an even greater disproportion during this time.

The wealthiest 2% of people owned more than a third of the nation, and the bottom 40% owned

no significant portion of wealth. Many of these people were unskilled immigrants who flocked to

America for the possibility of a better life. Unfortunately, what many immigrants found was poor

and dangerous working conditions due to the lack of regulation. Men, Women, and children were

working anywhere from 10 to 18 hours a week up to six days a week. While doing this some

families still werent able to make ends meet. The lack of a minimum wage or regulation was
6

taken advantage of by capitalists. The Iron Law of Wages states that capitalists are willing to pay

the bare minimum to keep their workforce alive, but with such a great influx of workers, there

were always replacements for those who could not or would not work as long and for as little as

the companies were paying. Corruption was rampant in government during this time. The Tweed

Courthouse is likely the best example of corruption. Initially proposed for $250,000 the building

bill was finally passed at $13,000,000 with a number government kickbacks. Hundreds of

thousands of these dollars went to brooms & other cleaning supplies.

Corruption and the wealth gap are not the only problems with capitalism, however. The

side effects which can be felt as a direct result of capitalism are everywhere. Global warming is a

very real, very serious happening which is in direct result of the lack of restraint capitalists are

willing to take. Not only have trillions of carbons been released into the atmosphere from plants

and factories, but also run off from these same places have contaminated water and food sources.

Many environmentalists have proposed solutions, but none have been deemed more effective

than a carbon tax. This would be a tax which operates by increasing based on the amount of CO2

released by companies into the atmosphere. Unfortunately, bills proposing this have been shot

down time and time again by politicians who dont realize or choose not to realize the lasting

positive impact bills like this would have on future generations. Many of these politicians accept

money from lobbying groups who are sponsored by businesses which these taxes would most

affect. This is another example of how capitalism itself is a conduit of immoral actions.

People are earning less, the government is accepting bribes, and the Earth is slowly being

destroyed. Does this mean capitalism is immoral? Fundamentally capitalism itself is amoral, but

the current forms of capitalism which are in place in most countries are flawed in some way, and

through these various flaws, immoral behavior creeps in to spoil the system. Smith, while
7

optimistic, understood that without certain checks and balances to keep capitalists at bay, there

would be widespread corruption. This is commonly what we see happening today and the reason

large businesses like Wells Fargo or BP Oil make headline news regularly. These companies do

everything in their power to increase the bottom lines of their operations, and when companies

start taking shortcuts there are significant consequences which can be felt.

The bottom line is that capitalism is flawed because for it to work properly there must be

a world full of competent, rational individuals, and unfortunately this isnt the case. Smith knew

that capitalists were the smartest of people in his day, and all it takes is for one person to take

advantage of another for there to be a moral problem. It is not the action of one, or two, or even

ten people which makes capitalisms basis immoral, it is the fact that capitalism fundamentally

rewards immoral behavior. Those who can willingly force peaceful people from their native

lands, like what was happening in North Dakota, cant be doing so based on a Golden Rule or

even an Invisible Hand. These people are acting out of rational self-interest, but just as Marx

explained this form of self-interest leads to greed. No moral person would be willing to tear gas

and beat innocent men and women who are simply protecting land promised to them by the

government, and while the executives who were pushing for this pipeline, did not directly harm

people, they were the ones pushing to get native people and protestors off of the land.

To say there is no moral basis for capitalism is not to say that there isnt morality in it and

that it cant also act as a conduit for good. Truly some of the best inventions, ideas, and creations

in our world have come from capitalism, but so too have some of the worst things. If money is

the root of all evil, then capitalism is the medium for which evil travels, because capitalism is the

system which fundamentally progresses towards acquiring the most possible of it. Government

regulation is currently the best and only real way to keep immoral actions from happening
8

amongst capitalists, so it is no wonder why so many business people are against it. While

interference from the government is necessary, there also needs to be a point at which it stops.

Certainly communism is not the answer, but a balance between both capitalism and socialism

might best be the way to govern large masses, and in knowing this, I look to support candidates

who push for it.

So is there a moral basis for capitalism? Based on the presented information there is no

moral basis. When a system can so consistently and fundamentally reward poor moral behavior it

shouldnt come to us as a surprise that this is the answer. To state that there is no moral basis for

capitalism isnt to say that it cant exist amongst moral things or create things which are, but it

wasnt designed for the greater good or even the average person, it was constructed out of the

barter system and mercantilism which inherently favor those with more stuff. To state that there

is a moral basis for capitalism would do a great disservice to the nearly 3 billion people in this

world living off of less than $2.50, and the 1.3 billion living in extreme destitute poverty. (United

Nations, 2014)
9

References

Abrams, M.H. (1999) Marxist Criticism. A Glossary of Literary Terms. 7th ed. Fort Worth:

Harcourt Brace College Publishers. 147-153.

Fry, R., & Kochhar, R. (2014). America's wealth gap between middle-income and upper-income

families is widest on record. Retrieved December 05, 2016, from

pewresearch.org/fact-tank/2014/12/17/wealth-gap-upper-middle-income/

Gert, B. (2002). The Definition of Morality. Retrieved December 02, 2016, from

plato.stanford.edu/entries/morality-definition/

DeSilver, D. (2014). 5 facts about economic inequality. Retrieved December 08, 2016,

from pewresearch.org/fact-tank/2014/01/07/5-facts-about-economicinequality/

N. Schlager & J. Lauer (2001) Social Darwinism Emerges and Is Used to Justify Imperialism,

Racism, and Conservative Economic and Social Policies. Science and Its Times (Vol.

5).Detroit: Gale. Retrieved from link.galegroup.com/apps/doc/CV264345 0570/WHIC?

u=lom_notredphs&xid=201248b

The concise Oxford dictionary. (1992). Oxford: Oxford Univ. Press.

Smith, A., & Cannan, E. (2003). The wealth of nations. New York, NY: Bantam Classic.

Snowden, N. (2015). What really caused the Great Recession? Rhyme and repetition in a theme

from the 1930s. Cambridge Journal Of Economics, 39(5), 1245-1262.

doi:10.1093/cje/beu069
10

United Nations Development Programme (2014) Sustaining Human Progress: Reducing

Vulnerabilities and Building Resilience. Human Development Report. Web Accessed

December 5, 2016.