Here are the most important facts:
The capitalist revolution began in Great Britain in the late-18th century. Since that time, the capitalist nations have been the freest countries of history. In Western (and now parts of Eastern) Europe, in the United States, in Japan, Hong Kong and the other Asian Tigers hundreds of millions of human beings are guaranteed freedom of speech, of religion, of intellectual expression, of assembly, and of voting. Men are free there to earn and to own property – their own homes, farms and land. They are free to start their own businesses and to retain the profits that they earn. A hallmark of capitalism is a rule of law that protects private property, safeguards investments and enforces contracts. The fundamental moral principle upon which capitalism is based is that individuals have inalienable rights and that governments exist solely to protect those rights.
Capitalism requires the limiting of governmental power to maximize the freedom of the individual.
Capitalism, the system of individual rights, has brought increased freedom to men all over the world. In Europe, capitalism ended feudalism, the dictatorship of the aristocracy. In America, the principle of individual rights impelled the British colonists to throw off the rule of the monarchy and establish history’s freest nation – and the logic of the country’s founding principles led, in less than a century, to the abolition of slavery, a practice that existed everywhere in the world through all of history, and one still practiced widely today throughout the non-capitalist world. In post-World War II Japan, under America’s influence, a semicapitalist, vastly freer society replaced the military dictatorship that preceded it. In Hong Kong, Taiwan and South Korea, the freedom of their capitalist or semi-capitalist systems enabled those countries (or colonies) to become havens for millions of refugees fleeing Communist oppression.
More broadly, it is to the capitalist nations across the globe that immigrants come, millions of them, both historically and currently, often fleeing political and/or religious persecution in their homelands. They come on rafts to the United States from Cuba. By the millions and for 15 years, the Vietnamese “boat people” fled for their lives from Communism – and today, more than 1.6 million of them have found freedom, mostly in the West. Muslims seeking religious and political freedom flee to the Western capitalist nations from all over the Islamic world. And, of course, for more than 150 years, America has been the hope and the chosen destination of persecuted peoples from around the globe, including from Ireland, Jews from Eastern Europe, Sicilians suppressed by the 19th century remnants of aristocratic rule, and Chinese and Koreans oppressed by the Communists.
Finally, the Western capitalist nations, by inflicting military defeat on the Fascists, and political-economic defeat on the Communists, eliminated the scourge of totalitarianism from large parts of the earth, bringing greater freedom to hundreds of millions of human beings in Japan, Germany, Italy, Eastern Europe and Russia.
Capitalism is the system of freedom.
Freedom leads to dramatic economic results. The “great laboratory” of capitalist West Berlin side-by-side with communist East Berlin provided the most vivid example — West Berlin, a modern, prosperous commercial center, East Berlin so destitute and squalid that, by 1989, the rubble remained from World War II battles four decades earlier. The striking truth is that the capitalist nations are the wealthiest countries of history. For example, famine, the scourge of all non-capitalist societies, past and present, has been wiped out in the West. There has never been a famine in the history of the United States. Has there ever been one in any capitalist country? The author does not know of any.3
Regarding the empirical correlation between economic freedom, i.e., capitalism and prosperity: the Heritage Foundation and the Wall Street Journal jointly publish an annual survey examining the degree of economic freedom in the world. Its title is the Index of Economic Freedom. “The story that the Index continues to tell is that economically freer countries tend to have higher per capita incomes than less free countries… The more economic freedom a country has, the higher its per capita income is.” The editors organize 155 countries into four categories, which are, in ascending order – repressed, mostly unfree, mostly free and free. “Once an economy moves from the mostly unfree category to the mostly free category, per capita income increases nearly four times.” The mostly free countries, including Japan, Taiwan, Canada, Poland and Sweden, have an average per capita income of greater than $11,000. Additionally, the per capita income among free countries is, on average, almost double that of the mostly free countries. The free countries, including the United States, Great Britain, Hong Kong and Singapore show an average per capita income of greater than $21,000.4 Capitalism is the system of wealth.
But under statism, conditions are diametrically opposite. Many political systems have ruthlessly suppressed the rights and lives of individuals. Feudalism, military dictatorships, theocracies, National Socialism (Nazism) and Communism are merely several examples. What these and other such systems share in common is the denial of individual rights. These are the anti-capitalist systems in which the individual is forced to live and die for the state. The horrors of such lack of freedom are historically and currently manifest.
Under feudalism, for example, the common man – the overwhelming preponderance of mankind – was suppressed by the ancien regime. Heretics were often burned at the stake; countless women were condemned to death for practicing “witchcraft;” the serfs were tied to the land and possessed few rights; and the most advanced thinkers were persecuted – Galileo’s forced recantation under threat of torture was merely the most notorious such case.
In the 20th century, statism reached its most virulent form. The National Socialists plunged the world into the most catastrophic war of history and butchered 25 million innocent victims in a 12-year reign of terror. The Communists were just as prolific in their commitment to brutality, establishing in Russia, China, Cambodia, North Korea and elsewhere totalitarian regimes that murdered a numbing 100 million victims in 80 years.
In Africa, oppressive dictatorships and ghastly tribal slaughters are the norm. In Sudan, the Islamic regime currently holds tens of thousands of blacks in slavery. In Rwanda, Hutu “militia” in 1994 hacked to pieces 800,000 victims, mostly members of the Tutsi tribe. In Somalia, endless, bloody warfare rages between rival warlords. In Zaire, the dictator, Mobutu, bankrupted the economy, pushing countless individuals into starvation by embezzling billions of dollars. In Zimbabwe, the Marxist dictator, Mugabe, stole the land from commercial farmers with the inevitable result: famine for millions of people. The shocking truth is that more than 225 years after the American Revolution, freedom is virtually unknown around the globe.
Statism – the subordination of the individual to the state – leads inevitably to the most hideous oppression.
Further, just as the freest nations, i.e., the most capitalist ones, are the wealthiest – so the most repressed countries are the most destitute. For example, according to one economist, Angus Maddison, feudal Europe and its aftermath was as miserably poor as is commonly believed.
Economic growth was non-existent during the centuries 500-1500 — and per capita GDP rose by merely 0.1 percent per year in the centuries 1500-1700. In 1500, the estimated European per capita income was roughly $215; in 1700, roughly $265.
In the 20th century, China under Mao suffered massive famine that killed anywhere from 20 to 43 million individuals – and hundreds of millions subsisted on less than a dollar a day. Also under the Communists, conditions were similar in North Korea and worse in Cambodia. The Soviet Union and its slave states of Eastern Europe were miserably poor by Western standards. The repressive dictatorships of Africa are countries where per capita living standards are measured in hundreds – not thousands – of dollars. Across the globe, the oppressed nations of Asia, South America and the Middle East are unspeakably poor.
For example, the Index of Economic Freedom shows that the repressed nations – including Cuba, Iran, Iraq (under Saddam Hussein) and North Korea – have an average per capita income around $2800. The mostly unfree countries – including Russia, Saudi Arabia, Egypt and Brazil – possess an average per capita income of approximately the same. This means that the freer countries – the semi-capitalist and capitalist nations – enjoy per capita incomes from four to ten times as great as those in the non-capitalist world.
Additionally, it must be pointed out that the unfree nations of the world have per capita incomes as high as $2800 for primarily one reason: the enormous aid they receive in various forms from the West, especially the diffusion of American technology. Without investment, loans, aid, technical training and supplies, etc., from the capitalist nations, the unfree countries would subsist in vastly worse misery than they already do. As merely one example, without massive food shipments from the West, an incalculable number of human beings would starve to death in the endless famines that recur in the unfree countries, from Ethiopia to North Korea to Zimbabwe.
Statism – in all its forms – is the system of appalling destitution. The facts show that capitalism is the system of freedom – and that it creates wealth. The facts similarly show that statism is the system of repression – and that it causes poverty. Capitalism is the system of freedom and prosperity. Its antithesis – statism in any form – is the system of oppression and destitution. Despite these facts, however, widespread antagonism toward capitalism exists; and generally from among society’s most educated members – Humanities professors, writers, artists, journalists, teachers, clergymen and politicians.
Anti-capitalist intellectuals and writers present a constellation of related criticisms. They hold that capitalism creates inequalities of income, that it exploits the workers and the impoverished, that it supplants spiritual values with materialism, and that it leads to imperialism and war. Successful businessmen, according to their view, accumulated fortunes largely by means of fraud and peculation. Such accusations come alike from socialists and conservative defenders of the current mixed economies, from secularists and religionists, from Marxists and from Catholic clergymen, from Jews and from Muslims.
Marx and Engels, for example, wrote:
“The bourgeoisie [the practitioners and supporters of capitalism]…has left remaining no other bond between man and man than naked self-interest and callous ‘cash payment’… In one word, for exploitation veiled by religious and political illusions, [the bourgeoisie] has substituted naked, shameful, direct, brutal exploitation.”
Pope Paul VI in the encyclical, Populorum Progressio, claimed:
“But it is unfortunate that on these new conditions of society a system has been constructed which considers profit as the key motive for economic progress, competition as the supreme law of economics, and private ownership of the means of production as an absolute right that has no limits and carries no corresponding social obligation.” The Pope went on to state that “a certain type of capitalism has been the source of excessive suffering, injustices and fratricidal conflicts whose effects still persist.”11
Such “liberal” modern American historians and writers as Charles Beard, Richard Hofstadter and Matthew Josephson routinely denigrated leading industrialists and capitalists, arguing that Cornelius Vanderbilt, John D. Rockefeller, Andrew Carnegie, J.P. Morgan, et al., built their careers by “exploiting workers and milking farmers, bribing Congressmen, buying legislatures, spying upon competitors, hiring armed guards, dynamiting property, [and] using threats and intrigue and force.”
The system of freedom and wealth is repeatedly and savagely attacked by many intellectuals and other highly educated individuals — worse, by men and women claiming to be “liberals,” humanists, lovers of man, i.e., the very individuals who should function as the protectors and preservers of human life. There is an enormous disconnect between the facts of capitalism’s nature and history – and the evaluation of these by many “progressive” writers and the millions whose thinking they influence. The facts of capitalism’s nature and history are not unknown. Certainly the educated critics are well aware of them. Capitalism’s enemies are simply unimpressed. Why? What is responsible for the great disconnect? The reason is that the objections to capitalism are not based on factual grounds – and all the evidence in the world establishing the freedom and prosperity of those living under capitalism will not influence the system’s critics to the slightest degree. The criticisms are motivated solely by moral and philosophical theories.
Since long before capitalism’s 18th century inception, moral theories antagonistic to egoism and profit-making have been dominant. From its birth, therefore, capitalism was an intellectual anomaly: a great boon to human prosperity that was unsupported, even opposed, by men’s dominant moral and philosophical codes. Hence the tragic historical spectacle of capitalism providing abundance for the first time for untold millions while sustaining repeated intellectual blows from its moral and philosophical enemies — from thinkers who claimed to care about mankind. For example, socialists – whether of a Marxist or non-Marxist variety – insist that it is an individual’s moral obligation to sacrifice himself for the state. Capitalism, they accurately point out, is not founded on principles of self-sacrifice. Rather, capitalism rests on an egoistic moral code – on the inalienable right of each and every man to his own life. The freedom that capitalism offers an individual to pursue his own personal, selfish happiness is, to socialists, anathema. To them, individual rights and political-economic freedom are appalling because they follow logically from an egoistic moral code that they regard as evil.
As a further example, modern egalitarians seek equality of income. But, contrary to their wishes, the freedom of the capitalist system will always lead to enormous disparities of income, because, in fact, individuals are not equal. They are not equal in talent, they are not equal in initiative, they are not equal in capacity to satisfy customer demand. Left free, some individuals will cure cancer, some will make the baseball Hall of Fame, some will drop out of school, some will work in the local grocery store, some will refuse to work and sponge off of families, friends and private charities.
The enormous general prosperity of the capitalist countries – the ability of capitalism to inherit widespread poverty and then proceed to create a vast middle class – does not and will not begin to impress egalitarians. The principle of economic equality – not universal prosperity – is their moral god. Consequently, they admire the “equal” destitution of Cuba’s citizens and repudiate the unequally-shared wealth of America. To them, it is morally superior if everybody subsists roughly equally on $1,000 annually and morally inferior if some possess millions while others live on “merely” $15,000 or $20,000 or $30,000. Rational men prefer to earn $15,000 in a country where others are millionaires to $1,000 in a country where others are equally poor. But egalitarians loathe the economic inequalities necessitated by the freedom of the capitalist system.
Finally, to a devout religionist, such as contemporary Islamists, what matters the earthly riches and comforts enjoyed by those in the capitalist countries? To them, all that matters is salvation in a higher world. If Allah repudiates the secularism, selfishness and materialism of capitalism, if such a life leads to eternal damnation, then the religionist must abjure it, even seek to annihilate it. Islamic terrorists, after all, did not destroy the towers of the World Trade Center simply because they were tall buildings. For years, they targeted those buildings because they were the nerve center of the world financial markets, located in the Wall Street area of New York City, the world’s commercial center. Those towers were, in terms both practical and symbolic, at the heart of global capitalism – and this is exactly why they were destroyed.
Too often, freedom’s supporters have limited themselves to responses that demonstrate capitalism’s unparalleled ability to increase men’s prosperity. While true and important, such defenses miss the essence of the criticism. It is as if a great dialogue regarding the most momentous issues held across a span of centuries has been conducted at cross purposes. The critics argue on moral grounds; the supporters on economic grounds. The critics, wedded to a moral code of self-sacrifice, are oblivious to capitalism’s practical success. The supporters, equally wedded to such a code, are morally disarmed against the onslaught of their antagonists — and are reduced to the citation of empirical facts and figures. The supporters, unable to break free of the conventional creed urging selflessness, have too often regarded capitalism’s inherent pursuit of self-interest as a guilty secret, akin to an unsavory skeleton in a family closet.
It is time to come out of the closet.
For two centuries, capitalism has cried out for its supporters to finally embrace the code of rational egoism as an undiluted virtue of which to be proud. That will be an important part of this book. The torrent of facts showing capitalism’s practical superiority will be presented within a philosophical framework showing that capitalism is the only moral system for human beings.
Two intellectual tasks must be accomplished in order to establish capitalism as the ideal social system. The first is to factually document the enormous practical benefits to man’s life wrought by capitalism. These are the tasks of history and economics. The second is the job of philosophy: to show that morality arises only because of the factual requirements of man’s life on earth, i.e., the concepts “good” and “evil,” “right” and “wrong,” are based in the facts of human nature, specifically in the objective requirements of human survival and prosperity. Only when the good is shown to be that which promotes man’s life will it be possible to understand and appreciate the enormous moral virtue embodied in capitalism’s unparalleled ability to do precisely that. All codes upholding human sacrifice must be exposed as anti-life, therefore, antigood, i.e., immoral. When the philosophical job is accomplished, then and only then will men have the moral code by means of which to properly evaluate capitalism’s stunning, life-giving success.
The tragic spectacle of capitalism’s life-promoting achievements evaluated by means of moral philosophies woefully unequipped to understand or appreciate them will finally, after 200 years, end. Part One of this book performs the practical task. In examining capitalism’s essence, its predecessors, and its earliest days, it provides sufficient factual evidence to establish the system’s historic achievements and to refute the common misconceptions that have been fostered about its nature and its past. The data presented are illustrative of the moral-philosophical theories of egoism, individualism and man’s mind as his means of survival — theories that are later identified and articulated as the intellectual foundation upon which capitalism rests.
Part Two — the book’s most important section — is dedicated to the philosophical task: the explanation of the rational moral theories necessary to understand capitalism’s nature and achievements — and to finally assess them properly. After two centuries, the great disconnect between facts and evaluation will mercifully be brought to an end. The book’s thesis will be clear: capitalism is the only moral political-economic system because it alone embodies the rational principles upon which human survival and prosperity depend.
Part Three refutes the chronic moral accusations levelled against capitalism — that it is responsible for war, imperialism and slavery. It shows that, on the contrary, capitalism and the moral principles on which it is based represent the antidote to these horrors that have long afflicted mankind — and, conversely, that statism and the moral principles on which it is based bear causal responsibility for them.
Part Four is devoted to explaining the essential reason that capitalism is economically superior to any form of socialism or statism more broadly. The writings of the great economists both explain the workings of a free market and validate it as the only means by which to create widespread prosperity. That economics is relegated to the end of this book, therefore, represents no slap at the economists. Quite the contrary, for to a significant degree they have done their job superbly. It is time for the moralists and philosophers to do theirs.
Finally, the Appendix applies the moral principles elucidated in the book to the important and long misunderstood topic of the “Robber Barons.” When evaluated from the standpoint of a rational code of ethics that upholds the requirements of man’s life as the standard of morality, the enormous productivity of Carnegie, Rockefeller, Hill, Harriman, et al., stamps them as productive geniuses who were enormous benefactors of the human race. Originally, this chapter was included in Part One but needed to be cut because of space limitations. But the topic was too important to be removed from the book, so was included in its present form.
The overall goal of rational cognition in any field is to reduce a vast complexity of phenomena to a principle(s) that explain it. For example, consider the quest of the Pre-Socratic philosophers to explain the teeming multiplicity of nature in terms of a single material principle — whether water, air or Anaximander’s “boundless.” The Greeks called it “finding the one in the many.” Regarding the enormity of capitalism’s success, both morally and practically, in different centuries, on far-flung continents, involving a hundred issues, the explanatory principle that will emerge is: capitalism is par excellence the system of liberated human brain power. This principle will recur throughout the book.
The moral and philosophical theories presented in this book are grounded fully in the revolutionary intellectual work of Ayn Rand — and the reader is strongly encouraged to read her seminal novel, Atlas Shrugged, as well as her non-fiction works, The Virtue of Selfishness and Capitalism: The Unknown Ideal.
This book is written for the rational mind anywhere and anytime, whether the reader is a professional intellectual or an intelligent layman. It seeks to make the case for individual rights and freedom in terms intelligible to all rational men.
This book is in full, one-hundred percent support of capitalism, and repudiates all forms of the initiation of governmental force, whether in the economic or personal affairs of innocent men. As such, the presentation is neither balanced nor open-minded, if “open-minded” means the belief that all opinions hold equal cognitive weight — for they do not. Rather, the book is objective. It is open exclusively to facts and to rational argumentation. It is because of its objective method that its content is relentlessly pro-capitalist, for no facts exist and no rational arguments can be adduced to show the superiority of statism.
The author has a proudly selfish stake in promoting capitalism. As an American — though a teacher — he is rich, as are all Americans by both historic and current non-capitalist standards of wealth and poverty. Since capitalism is the only system capable of creating universal prosperity, he recognizes that his ongoing wealth depends on its continued
Andrew Bernstein
