Free Markets are Useful; They Are Not Moral

It is election season again, and you know what that means: Anybody to the left of Atilla the Hun is going to have to spend their time explaining why income tax is not against the 13th Amendment and why fishing licenses are not a form of tyranny. And it is when a certain portion of the media will do their best to convince us that we have gone so far down the road to socialism that we will soon be reserving the entire Mountain Time Zone for a new set of Gulags.

Actual history aside, we are all prepping for the great clash between communism and capitalism that occurs every four years in the dark recesses of our partisan minds. And it is all (or at least mostly) poppycock.

To true believers, both communism and capitalism are immune to historical critique. Tell a group of devout Marxists that communism has failed wherever it has been tried, and they will respond that it has never been tried. The “so-called communist societies” of the Soviet Union and the People’s Republic of China, they will say, were nothing like the pure Worker’s Utopias that Marx imagined.

It works about the same way with die-hard free-market types. Point to the abusive Industrial Revolution societies of 19th century England and America, and they will respond that these were nothing like a real free market. Read a few passages from Hard Times or The Jungle, and they will look at you with pity and murmur something about “statist propaganda.” If we just allowed the markets to be free, they tell us, all of our problems will fade away.

Both positions end up saying the same thing: that if a pure ideology could just operate without the constraints imposed by history and reality, it could produce, if not a perfect society, at least a very good one. But this is the opposite of how things actually work. Responding to the constraints imposed by history and reality is what governments are supposed to do. “Sticking to an ideology,” as it turns out, is the opposite of “governing stuff.”

This is not to say that communism and capitalism are equally good starting places for a society. They are not; capitalism wins hands down. Free markets are much, much better than command economies at things like incentivizing production and facilitating distribution. But we should understand why this is so. It is not because communism is evil and capitalism is holy; rather, it is because the core assumptions of the free market system — that people are basically selfish and will almost always pursue their self-interest at the expense of other people or society in general — align almost perfectly with human nature.

Free market capitalism is not moral good; it is a concession that we make to immorality to accommodate the nature of fallen human beings. One of the first people to realize this was the Anglo-Dutch philosopher and poet, Bernard Mandeville. In 1705 — seventy years before Adam Smith published The Wealth of Nations, Mandeville wrote his most famous poem, “The Fable of the Bees” — one of the world’s great parables of free-market capitalism. Subtitled “The Grumbling Hive,” Mandeville’s poem tells the story of a hive of selfish, vice-ridden bees who all seek their own pleasures and, in the process, become an enormously productive society:

Thus every Part was full of Vice,
Yet the whole Mass a Paradice;
Flatter’d in Peace, and fear’d in Wars
They were th’ Esteem of Foreigners,
And lavish of their Wealth and Lives,
The Ballance of all other Hives.
Such were the Blessings of that State;
Their Crimes conspired to make ’em Great;
And Vertue, who from Politicks
Had learn’d a Thousand cunning Tricks,
Was, by their happy Influence,
Made Friends with Vice: And ever since
The Worst of all the Multitude
Did something for the common Good.

This state of affairs goes on until a do-gooder bee ruins everything by convincing the bees to abandon their selfish ways and concentrate on the common good. Without selfishness to motivate them, they lose the desire to work. Without luxuries to pursue, the producers of luxury items have no work to do. Saved from everything that made it evil, the bees lose everything that made them great.

Mandeville gets it about right: free markets work, and work very well, because they appeal to the concerns that motivate us and not to the values that inspire us. But in his own way, Mandeville was every bit as much a collectivist as Trotsky or Mao — which is why he used the ultimate symbol of collectivism, the beehive, to make his point. He believed that any sense of individual morality had to be tempered with a concern for the whole. States, he believed, had no business encouraging people to be moral, when it was so clearly in the public interest that people act amorally.

He understood, in other words, that capitalism was a tool and not a moral principle. Tools are, by their very nature, outside of the discourse of morality. They can be used for good things, bad things, or just things. But they are endowed with neither a moral nature nor a set of natural rights. I am not arguing against capitalism at all. I would not have wanted to live in the Soviet Union in 1975, and, having traveled recently to both Cuba and China, I have no desire to live in either place.

But the same goes for England or America circa 1875. Pure, unregulated capitalism has been tried too, and it didn’t work. It lead — as it must always lead — to monopolies, oligarchies, price-fixing, environmental degradation, massive abuses of labor, great wealth for a very few, and virtual slavery for most workers. Though this society generated great wealth, it also produced horrendous poverty and a perpetual underclass; it was not a society that I would have wanted to live in. I simply don’t have the constitution to work sixteen-hour shifts in the coal mines in exchange for a baked potato.

The difference between a moral principle and a useful tool could not be more important. Moral principles belong to ideologies. By their very nature, they must be rigid, absolute, and uncompromising. Tools, on the other hand, are for pragmatic managers. We can use them when, and to the extent that, they give us real solutions to actual problems. And we can use other tools to solve other problems.

This is why every society that anybody wants to live in today mixes a free-market economy with some centralized redistribution of wealth and income. Capitalism is like oxygen — it works best when it is diluted, and, in its pure form, it can blow everything up. The United States redistributes about 24% of its GDP through taxation. Almost nothing that a Democratic candidate could plausibly propose would take our distribution rate much past 30% (comparable to Ireland or Canada). And the most drastic, drown-the-government-in-the-bathtub tax cut would be unlikely to take it below 20% (about the same as Lithuania or Costa Rica).

No country has a purely command economy, nor does any country have a completely free market. Even the biggest redistributors (the Scandanavian states) redistribute only about twice as much as the United States does (Norway is the Highest at 54%). And Communist China redistributes even less (20%). In our seemingly high-stake elections, we are really just having fairly minor arguments over a few percentage points and pretending that we are taking moral positions when we are really just trying to figure out the best way to use our tools.

Michael Austin is a former English professor and current academic administrator. He is the author of We Must Not Be Enemies: Restoring America’s Civic Tradition

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store