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The Moral Foundations of the Free Market Society

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Higher education in the United States is engulfed in an ideological campaign against the American political and economic traditions of individual liberty, free competitive markets, and constitutionally limited government. In its place is the “progressive” agenda of collectivist identity politics, the regulatory and redistributive interventionist economy, and political plunder and power.

Both “scientific” and casual surveys of political orientation and bias in American academia have strongly highlighted the large “left-of-center” majority among college and university professors. Conservatives and classical liberal/libertarians are relatively few and far between at most institutions of higher learning.

But the worst of it is not simply the marginalizing of those usually labeled as on the political “right,” but the growing intolerance of any views other than the left-of-center majoritarian ones. This intolerance, as some cases covered by the media have brought out, has taken the form of both verbal and even physical attacks in some instances.

The Progressives’ War on Individualism and Capitalism

There is a near totalitarian “progressive” dogmatism on some campuses that, like its Marxian ancestor, sees all to their political “right” as agents or apologists for social, racial, or gender exploitation and oppression. These new ideologues of intellectual and political tyranny consider individualism, capitalism and an impartial rule of law with an equality of rights rather than privileges as a smoke screen of “false consciousness” to delude the masses to accept their abuse by businessmen and white males in all walks of life.

They are called upon to resist and silence everywhere these “enemies of the people,” and especially in the halls of academia. Colleges and universities are, for them, a “hot house” for the cultivation and nurturing of a new collectivism through generational indoctrination of the young. Any alternative seeds of individualism and free market capitalism must be eradicated from the educational nursery that is fertilizing the “raised consciousness” of social, racial and gender collectivism.

In this setting the task of the classical liberal-oriented economist is to oppose this dangerous direction and trend. Not through matching dogma and closed-mindedness, but through reason, argument and persuasion. Essential for the economist friend of freedom is to show how and why the free market economy is the basis for human liberty, cultural betterment and material prosperity.

The starting point, in my view is to emphasize that there are basically two way human beings can interact and associate with each other: through the threat or use of force or by mutual agreement and voluntary consent.

Who Wants to be Murdered, Robbed or Defrauded?

I sometimes start out a class at the beginning of the semester by asking the students, which one of them woke up this morning just wishing that some time during the day someone would kill them? And at the end of the day was disappointed it had not happened?

No hands are ever raised.

I then ask, which one of them started the day really hoping that someone would rob or defraud them during some social or market interaction? And, again, if it had not happened, they ended the day disappointed and frustrated that no one had stolen from them or cheated them?

Again, no hands are raised.

I also ask, which one of them started the day really, really hoping that someone would put a gun to their head and tell them that from now on they were going to be that person’s slave, who would order them around, telling them what to do, how to do, and when to whatever the slave-master commanded, under penalty of threatened physical harm if they disobeyed? And, once more, they were very sad that this had not happened by day’s end?

And, once more, no hands are raised.

Finally, I ask, if a someone in this class were to be murdered, robbed, defrauded or enslaved, would they consider this right, good, or just? No one says, yes.

All of them, in other words, I suggest, would prefer to be a free person whose life, liberty and property were respected by others from the use of force or its threat. Each of them, I state, are implying that they consider it right, good and just that each of them be left at liberty to manage and direct they own lives, in their own ways, peacefully and unmolested by others in society.

Capitalism’s Premise: Individual Rights and Liberty

I then explain that the economic system that most closely offers an implied right and security for each to be that free individual is the free market economy, capitalism.

I ask, when have any of them ever walked into a shoe store looked around and, maybe, tried on a pair of shoes, but when you decided to leave without buying anything a gruff and intimidating character with a club or a gun said, “The boss says you ain’t leaving without buying something”? None of us, I point out, has ever had such a direct experience.

Why? Because the philosophical and moral premise underlying transactions in the marketplace is that each participant has the right to say, “Yes” or “No” to an offer and an exchange.

Why does every person have this implied right to “Yes” or “No” without attempted physical intimidation or use of force to make him act against his will? This is due to the fact that the foundational American principle is that every one of us has an inviolable individual right to their life, liberty, and honestly acquired property.

Virtually every other philosophical and political system throughout human history has been based on some version of the opposite. That is, that you do not own yourself; your life and property are at the disposal of the primitive tribe or the medieval king, or the social, national, or racial group or “democratic” community to which you’ve been designated as belonging.

That is the premise of all forms of political and economic collectivism. You work for the group, you obey the group, and you live and die for the group. The political authority claiming to speak and act for the group presumes to have the right to compel your acquiescence and obedience to the asserted needs and desires of that collective group.

Only liberal, free market capitalism as it developed in parts of the Western world, and especially in the United States, broke free of this age-old collectivist conception of the relationship between the individual and others in society.

The modern ideas of individual liberty and free enterprise that began to develop and be argued for about 350 years ago transformed the way men lived and earned a living, and the ethical premises underlying human association in society.

A new morality emerged under which human relationships became based on mutual consent and voluntary agreement. Men could attempt to persuade each other to associate and trade, but they could not be compelled and plundered so one person could get what he wanted from another without their consent.

For Americans, it is heralded as the fundamental principle under which our country was based: It is held to be a self-evident truth that all men are created equal and endowed with certain unalienable rights among which are their individual rights to life, liberty and the pursuit of happiness.

Capitalism Fosters Honesty and Good Manners

As a consequence of this principle of liberty, in the marketplace of the free society individuals learn and practice the etiquette and manners of respect, politeness, honesty and tolerance. This naturally follows from the fact that if violence is ethically and legally abolished, or at least minimized, in all human relationships, then the only way any of us can get others to do things we would like them to do for us is through reason, argument, and persuasion.

The reason why the shoe salesman is motivated to act with courtesy and deference toward us when we are in his store is precisely because he cannot force on us to buy a pair of the shoes he wants to sell. We can walk down the mall corridor and buy those shoes from another seller interested in winning our business, or we can just go home without buying anything that day.

The clichés of “serve with a smile,” or “the customer is always right,” in fact are inescapable resulting manifestations of the voluntarist principle at the basis of all market transactions.

No businessman is likely to keep his market share or even stay in business in the long run if he earns a reputation for rudeness, deception and dishonesty in his dealings with either other businesses or his consumer customers.

The famous Scottish economist of the eighteenth century, Adam Smith, long ago explained that the motivation for respectful, polite, honest and deferential behavior on the part of any businessman is his own self-interest. If he does not, he may not long remain in business, as every private enterpriser knows who had learned to appreciate the importance of gaining and maintaining his brand-name and personal reputation in the eyes of all those with whom he has dealings.

Such polite, courteous, honest and deferential behavior may start out as the self-interested conscious and intentional attempt to merely succeed in the market pursuit of profits, when voluntary and free market dealings and transactions become the common and everyday way in which people associate.

But, over time, such rules of “good behavior” become habituated, a part of the routine of regular day-in and day-out interactions, until, finally, they are transformed into the customs and traditions expected in any and all human encounters, whether in the marketplace or not.

Thus, the practice of self-interested good manners and respectful tolerance fostered first in commercial buying and selling become embedded and reinforced as the general societal rules and ways of civilized and “polite society.” And, thus, capitalist conduct makes its contribution to a more cultured and humane civilization.

Capitalism Creates a Spirit of Humility, Not Political Arrogance

I would also suggest that the students should be helped to see that free market capitalism also inculcates a spirit and attitude of humility. In the open and competitive marketplace, anyone who has an idea or a dream is free, in principle, to try to bring it into reality. No private person or political power has the right or authority to prevent him from entering the field of enterprise and trade to discover if his idea or dream can profitability be brought to fruition.

The capitalist “rule of the game” is that anyone is at liberty to enter the arena of enterprise if he has the will, determination and drive to attempt to make that new product, that better product, that less expensive product. This implicitly takes for granted as an underlying assumption that no one, not any of us, has the knowledge, wisdom and ability to know beforehand whose ideas and efforts can turn out to be a success rather than a failure.

The Austrian economist and Nobel Prize-winner, F. A. Hayek, once referred to competition as a “discovery procedure.” If we knew ahead of time who in a marathon, for example, would come in first, second, third and so forth, as well as the actual relative times of the runners, what would be the purpose of running the foot race?

Even when we have the track record of previous marathons, and think we know something about the relative strengths and weaknesses of the competitors looking ahead to a future race, the fact is we do not know how the race will actually play out, until the runners finish the course.

The humility of the marketplace, no matter how strongly confident the individual businessmen may be in their own ideas and abilities, is that no one – neither an private individual nor even the most well-informed government bureaucrat – has sufficient knowledge and forethought to successfully “pick winners” and “avoid losers” for the good of society as a whole.

This can only be found out through the competitive rivalry of the private enterprisers who are each trying to make the product or supply the service that will gain the business of customers, as found out from whose products or services the buying public actually decide are the ones that best fulfill their existing or discovered needs, desires and wants.

Capitalism’s Moral and Virtuous Watchwords

The watchwords of capitalist free market morality, therefore, are liberty, honesty and humility. The freedom of each individual to live and choose for himself; the ethics of fair dealing – that is, human relationships on the basis of force and fraud are banned in all their forms; and the modesty to admit and accept that none of us is wise enough to arrogantly claim the right to plan and coercively direct others in society.

Not only would it be morally wrong to presume to tell others how best to live by reducing them to the status of commanded followers of our own ideas and desires, it would limit what all mankind can accomplish to what the government central planner or regulator can imagine and know within the limits of his own mind’s possibilities for understanding all that there is to know.

How much better, both for the individual and all the rest of us, to leave everyone at liberty to think, imagine, and act as they consider most profitably best for themselves, so all in society can, also, benefit from what a human mind can creatively conceive that others may not.

We live at a time, I also explain to my students, in which real-world capitalism is hampered and stymied in almost every direction by the heavy hand of government regulation, control, restriction, prohibition and taxation. It is politically managed and manipulated capitalism, and very far, therefore, from the truly free market capitalism that I outline to those students in terms of its moral premises and social virtues.

A truly free market is certainly not the twisted conception of “capitalism” that is presented in the media and the movies and by too many professors in college and university classrooms. Real free market capitalism, by recognizing and respecting the right of the individual to his own life and liberty and honestly acquired property, is that economic system that offers humanity the most moral system of human association imaginable by and for man.

Free market capitalism is the ethical highroad to human dignity and mutual prosperity. If its moral and related foundations can be successfully articulated to students in a persuasive manner, the totalitarian progressives can be met and opposed through the power of reason and a basic understanding of the connections between economic liberty, social peace and mutual well being for a better future for all of mankind.

(Based on a presentation delivered at the annual meeting of the Association of Private Enterprise Education in Maui, Hawaii, April 11, 2017, for a session devoted to “Teaching the Economics, Philosophy and Morality of Free-Market Capitalism.”)  

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    Dr. Richard M. Ebeling is the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel. He was formerly professor of Economics at Northwood University, president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).