We live in an era of collapsing confidence in institutions, and the market economy has been no exception. Polls show declining support for capitalism, especially among the young. And the market system is increasingly under attack not only from the left but from some smart social conservatives, populists, and nationalists on the right. To effectively defend democratic capitalism, its champions will need to understand the nature of these criticisms, to see where they have a point, and to think about how to make a case for markets that takes them seriously.
Not all the contemporary critics of capitalism are all that serious, of course, just as not all its defenders are. But those who voice the deepest grievances have in common some complaints that should not be ignored.
For the most part, these complaints are not fundamentally economic but rather are moral. This sometimes is not obvious even to the people lodging them. But arguments about inequalities of wealth or power, cronyism and special-interest influence, a shallow consumerism that corrupts the soul and undermines the dignity of work, a stateless cosmopolitanism that neglects national priorities, and a commitment to creative destruction over protective preservation are arguments about the ends of capitalism at least as much as its means. They accuse our society of a failure to prioritize the highest things, and so they charge us with moral failings embodied in a corrupt political economy.
This means, for one thing, that evidence of capitalism’s ability to produce prosperity will be of limited use in response. It is important to make people aware that the market system has brought billions out of grinding poverty and continues to do so still. This is essential to the moral case for capitalism and is an answer to the shallowest charges against it. But if the market were in fact, as some of its critics suggest, a great machine for replacing material poverty with moral poverty, then evidence of its success in reducing deprivation would not be proof against the charge that it produces depravity. Similarly, evidence of economic growth is not an answer to the charge that overall prosperity comes at costs to some particular Americans that should be unacceptable to all of us.
The case for markets as engines of liberty is crucial to the defense of capitalism too, but in a similarly constrained way. The right to property is especially vital to human dignity, and no society could be just while violating it or trampling our other liberties. But modern capitalism may not be the only way to respect these rights and liberties, so evidence of the various ways that markets promote and undermine the dignity of persons would have to influence our judgments about when to defend markets and when to criticize them.
The deepest challenges to capitalism therefore have to be answered on the grounds of morality. If, as Irving Kristol once asserted, the market economy promises us wealth, freedom, and a just society, it is the third of these promises that the system’s most serious critics insist it is failing to keep. And a sense that our way of life is in some key respects unjust is behind much of our broader loss of faith in institutions too.
Part of a moral defense of the market system would have to shed light on its moral goals and premises. These are not hard to discern, for instance, in the thought of capitalism’s intellectual progenitors. Adam Smith was a professor of moral philosophy, and his project sought to ground a modern successor to Aristotelian ethics in a sophisticated sense of human sympathy and sociability. In a free society, Smith suggested, men and women cannot be compelled to act morally, so we require institutions that form our characters and dispositions so that we might choose to act morally. The market is one such institution. Through the division of labor, it enables essentially every person to approach the larger society on the basis of what he can offer rather than just what he needs, reinforcing his dignity. And by valuing reliability, honesty, civility, discipline, and similar bourgeois virtues, markets give us the habits required to handle an enormous amount of freedom responsibly. Because they prioritize the needs of consumers, rather than just those of the owners of capital, markets are also powerfully democratizing forces. And because they are so very good at making us productive and rich, they help the poor to rise as well.
That markets can be perverted by cronyism, corruption, self-dealing, and the capture of regulators is not an argument against them. Every system can be so perverted — decidedly including all the modern alternatives to capitalism that the human race has tried. Societies with market economies should do what they can to minimize such corruption and to avoid the circumstances that invite it, but that is more an argument against Medicare for All than a case against capitalism.
And yet, these virtues of the market system alone do not suffice as an answer. Capitalism is most vulnerable to moral critiques because it rests upon a moral foundation that it can also undermine. It requires — for its workers, employers, owners, and investors — a kind of human being that it does not by itself produce and can easily corrupt. Left to itself, it would tend to prioritize consumption over every other human endeavor and profit over every other standard of the good, and so could badly distort our priorities. If our politics and culture were merely extensions of the market system — if market signals were our primary measures of merit, virtue, decency, freedom, responsibility, and worth — then ours would indeed be an unjust society.
But our politics and culture are much more than that. The best case for capitalism is a case for markets as one crucial set of institutions in a free society deeply rooted in the West’s liberal and pre-liberal soil. It is crucial because at its best it protects every man’s right to the fruits of his labor, encourages virtues crucial to living free, and has proven unbeatably capable of improving everyone’s living standards. But it must remain rooted, because man does not live by bread alone, and because both the market and the larger society depend upon other formative institutions that help us all become better human beings and citizens.
These other institutions — the family, religion, schools, civic associations, political bodies, and more — teach and habituate us in ways that encourage distinct virtues of their own. They all have their excesses, to be sure. But they also often work to keep one another in check. Their tensions with the ethos of the market do the same. Communal and national loyalties can make for inefficient economics, and obligations to tithe or observe the Sabbath aren’t always great for business. But commitments such as these can help us see that our communities aren’t just random collections of labor and capital, our nation isn’t just another place to work or invest in, raising children isn’t one consumer preference among many, and business isn’t everything.
Critics of the market should be willing to acknowledge that it is made better by these countervailing yet supportive institutions throughout our society. But defenders of the market therefore have to make themselves defenders of these other institutions too, and of the social order of which they are all part. The market can advance the cause not only of prosperity but of justice only if it is embedded in this larger whole.
Seeing the virtues of markets in their embeddedness in our larger social order can also help avoid the kinds of utopian arguments for markets that some of their more libertarian defenders sometimes make. The case for markets is a case for humility before the immense complexity of social life. It begins from our ignorance, and properly understood it should steer us away from overconfidence.
The tensions that arise among the demands of these different institutions and the commitments that constitute our social order can often be addressed by individuals setting priorities in their own lives. But there are also instances when dealing with such tensions requires politics. This means that sometimes our economic policy has to be determined by more than purely economic considerations — by our sense of the kind of society we want to be and the kinds of goals we want to pursue together. Overall economic growth is one such vital goal, as surely everyone agrees. But there are other goals that matter, including equity, cultural vitality, social order, family formation, piety and religious liberty, individual and national self-sufficiency, personal liberty and communal self-determination, and moral traditionalism and moral pluralism, among many others. Ordering these frequently competing or contradictory ends in hard cases is part of what our politics is for, and the argument for capitalism cannot be an argument for putting economics above all else.
To suggest that our commitments to market ideals must be moderated in this way, and also that they should be allowed to moderate some of our other commitments, is not to attack capitalism but to defend it. It is to grasp its full significance, its place in the larger scheme of our free society. Indeed, the same is true of liberalism itself: To show how its strengths can invigorate us while its weaknesses must be mitigated by our other fidelities is to show how liberalism can succeed, not why liberalism failed.
Against its most serious and able critics, then, the market needs defenders who see it as one among the several crucial institutions most indigenous to liberalism, and who acknowledge that, like all the others, it draws on our society’s deep roots in pre-liberal traditions and can thrive only as long as it does not twist or sever those. In other words, capitalism needs conservative defenders, and deserves to have them.
This article appears as “The Market Tradition” in the May 20, 2019, print edition of National Review.