Capitalism Defined and Defended
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CAPITALISM DEFINED AND DEFENDED CLEMSON INSTITUTE FOR THE STUDY OF CAPITALISM TABLE OF CONTENTS PART I: CAPITALISM DEFINED WHAT IS CAPITALISM? ........................................................................................................................4 MORAL FOUNDATIONS 1. Self Interest & Egoism ...................................................................................................5 2. Rationality & Morality ...................................................................................................6 3. The Initiation of Force ...................................................................................................8 BASIC PRINCIPLES 4. The Fundamental Right Is the Right to Life ...............................................................10 5. Property Rights ...............................................................................................................11 6. Contract Rights ............................................................................................................12 NATURE OF GOVERNMENT 7. Government’s Proper Purpose ........................................................................................13 8. Objective Law ............................................................................................................................13 9. Rights in Political Society ................................................................................................15 ECONOMICS OF CAPITALISM 10. Introduction ..................................................................................................................16 11. Division of labor ............................................................................................................17 12. Competition ..................................................................................................................18 13. Prices .............................................................................................................................21 14. Money............................................................................................................................22 15. Banking .........................................................................................................................23 STUDY QUESTIONS ............................................................................................................................25 SUGGESTED READINGS ......................................................................................................................28 PART II: CAPITALISM DEFENDED SOCALISM VS. CAPITALISM .............................................................................................................30 DEFENDING THE INDEFENSIBLE, PART 1 ........................................................................................33 DEFENDING THE INDEFENSIBLE, PART 2 ........................................................................................36 PART I CAPITALISM DEFINED Capitalism Defined 3 WHAT IS CAPITALISM? The social system that separates economy and state completely. Capitalism is the socio-economic system To protect these freedoms for all citizens where all property is privately owned, and to make it possible for them to act where freely formed contracts form according to their own judgment, the the basis of economic interaction, and government must protect men from the where the government does not engage initiation of physical force. By outlawing in regulation, supervision, or direction the initiation of force, both by other of market processes. In short, it is a citizens and by the government itself, the government policy of non-interference government guarantees each individual’s with the economic lives of its citizens; it freedom of action in a social context. is the system of laissez-faire. The proper In practice, this means protecting implementation of a program of laissez- individual rights, including the right faire capitalism, however, requires an to property. To do this, a government appropriate political system at its base. must be constitutionally restricted to use force only in retaliation against those Laissez-faire capitalism means the who initiate its use. The government systematic implementation of the in a capitalist system is thus limited to principle underlying the separation of providing an internal police, a court economy and state—freedom. To be fully system, and a military for national defense. free, men must have the ability to guide and direct their actions according to their Keeping this context in mind, it is own best judgment. Men must also have possible to state the definition of the ability and freedom to act on those capitalism in its most essential terms: conclusions and the ability to acquire the means to do so. These freedoms Capitalism is the social system recognize a man’s right to life—that is, based on the recognition and his right to take the actions required protection of individual rights. for the survival of a rational being. 4 Capitalism Defined MORAL FOUNDATIONS Self Interest & Egoism Capitalism begins with the individual computers, human beings have had to as the primary unit of political, social, produce in order to survive. Man’s needs— and economic life. It recognizes that winter coats, MRI machines, apartment each individual has moral sovereignty homes, televisions, etc.—are not provided over his own life. Each man must choose by nature, they must be created. his own course of action—whether he becomes a CEO or a day laborer— All of these goods came about because according to some moral code. In a some individuals acted in their own capitalist system, it is morally proper for interest in pursuing their own survival. individuals in general, and businessmen Every great producer, from Thomas in particular, to pursue their own Edison to Henry Ford to Sam Walton, self-interest. Underlying the system has been driven by what most satisfies of capitalism is a morality of egoism. and fulfills his own life. Although each of these men has greatly benefited The inventor who designs a new factory humanity by providing it with light bulbs, tool to save human labor power to the cheap automobiles, or cheap consumer financier who devises a new method for retailing, his motive in working toward allocating capital to worthy ventures, these ends must be his own satisfaction those who produce material goods—the and fulfillment. Each of these men, and lifeblood of capitalism—do so because the millions of producers throughout it serves their own interests. These history, have enjoyed a personal and selfish producers produce not because it serves reward in the act of production itself. others or helps the poor; they do so The uncountable hours of labor, mental because they have a deep selfish motive energy, and effort that each put into the for doing so—it advances their own act of production could only have been well-being. Each individual faces the possible if the work itself was personally same basic choice, he must either act to rewarding. It was for their own lives, first produce or labor for the values he needs and foremost, that they acted, not for to survive and, ultimately, to flourish, or the social consequences of their work. he faces poverty, sickness, and, ultimately, The act of pursuing one’s goals does not death. Each must choose to produce the come automatically; these goals must material values necessary for his survival. be discovered and chosen. Likewise, From the primitive tools used for the means of pursuing those goals is not hunting to advanced factories that create built into human nature; they, too, must Capitalism Defined 5 be discovered. Scientists, businessmen, dank and dark hovels do not. At a inventors, and other creative individuals deeper level, though, their process of throughout history have had to confront establishing these basic requirements their circumstances and figure out what for survival points to a deeper truth— things are good for human life and what that certain methods of making one’s things harm it. They have ascertained, choices and pursuing one’s values leads for example, that some foods provide to success and happiness and that other optimal nutrition and others cause methods lead to pain, suffering, and disease or even death. They have learned death. The method that leads to human that building homes with good airflow flourishing is the method of reason. and light promote human life whereas Rationality & Morality All of the goods that man uses in his life simple levers and pulleys, to make them have come to him by a process of thought, work correctly. Reason is necessary not i.e., through reason. Consider what it only for building shelter, it underlies all required to build one’s home. Those of the values that man needs. Nothing is who built the home, the architects and given to man in nature—he must look out engineers, had to acquire a knowledge at reality with his senses, put together of how material objects act in relation to what he sees with his reasoning mind, and each other—they had to know everything come to a conscious conclusion about from physics to mechanics to astronomy. how he will shape it to serve his needs. They had to learn why only walls of a certain thickness can support a roof The contrast to using reason as a means of a given size, or why windows facing of survival is to go by some other south allow for more natural light. The method—whether this is by wishing, by suppliers who provided the materials relying