Why Capitalism and Free Markets?

Last week I ran across an interesting post on The American Scene, which was in turn a response to a Wall Street Journal opinion piece by Thomas Frank (of What's The Matter With Kansas fame) whose purpose was to shed a few crocodile tears for the plight of beltway libertarians whose success in promoting cut throat free market ideology was making their lives as non-profit employees untenable.

Selling out is not a threat to the market order; selling out is how the market gets its way. Just look at the city in which all these remarks were made. Private-sector Washington is one of the wealthiest places in America. Public-service Washington lags considerably behind. The chance of ditching the one for the other is what accounts for everything from the power of K Street to the infamous "revolving door," by which a public servant takes a cushy corporate job after engineering some extravagant government favor for the corporation in question – or its clients.

The libertarian nonprofits that line the city's streets often serve merely to rationalize this operation after the fact, giving a pious shine to the policies that are made in this unholy manner.

To their credit, the nonprofit libertarians I watched the other night did not ask for sympathy. Their own doctrine won't permit it. Having spent years urging lawmakers to wreck the social order that once made occupations like theirs tenable, they will cling stubbornly to their free-market idol all the way down.

Frank's piece is, to be honest, not the most coherent you will ever read. There are two arguments I think one might take from it, and it's unclear whether he means to make one or both of them:

1) The triumph of a libertarian agenda (promoted by non-profit libertarian think tanks) in Washington is creating an environment in which non-profit entities will cease to exist.

2) Said triumph of libertarian agenda results in people making more money in the private sector than they do working for non-profits.

However, leaving aside which of these Frank is actually arguing, there are some interesting windows on the standard critiques of capitalism to be found in this piece. Indeed, this underlines for me that one of the biggest problems in the debate between those who think capitalism is bad for society, and those who don't, is that supporters of capitalism generally do not believe what their critiques believe them to.

Describing pro-capitalist think-tank employees he writes: "He is subsidized, in other words, to hymn the unsubsidized way of life. Rugged individualism may be his creed, but a rugged individual he ain't."

Now perhaps I'm very much mistaken, but my impression is that entities such as the Cato Institute, Heritage Foundation, American Enterprise Institute, etc. are supported by donations, not by government subsidies. Either way, however, what exactly is the different between a "non-profit" and a private company? In both cases, the entity seeks to provide some sort of service (whether a product, a publication or research) which is of sufficient value to others that it receives enough money to keep doing what it's doing. The only different with a non-profit is that it does not, at the end of the year, expect to have a surplus net income to distribute to its owners.

So how is it that free market advocates are wrecking the social order that once made occupations like theirs tenable? If Frank's argument is 1) that I listed, it's very hard to see how this is the case. There's nothing about a capitalist free market economy that prevents people from donating money to support research/advocacy organizations that they like. And so it's not clear to me how the agenda of free market advocacy groups serves to destroy the social order that made them possible.

If, on the other hand, his argument is primarily 2), then perhaps one could argue that increasingly free markets would make professionals of equal skills in the private sector able to make more money than those at non-profits might reasonably expect to make. In other words: free market advocacy might benefit those in the private sector much more than the amount of "trickle down" to the non-profits themselves benefits the advocates.

What I think we're seeing at the root of all this, however, is the worldview of a certain critique of capitalism, in which it is held that capitalism is essentially the deification of "profit" and that profit is simply another word for greed. This explains the comment that supporting capitalism will destroy the social order that makes non-profits possible: In a completely capitalistic order everyone would be so greedy that no one would donate any money to anything -- and they would make themselves feel good about it by insisting that those freeloaders who don't make a profit don't deserve any money anyway.

This characterization is certainly well designed to create feelings of righteousness in the hearts of those who believe that the only way anything good will ever be done is if smart and virtuous central planners do it for us, but it doesn't necessarily correlate well with what most free market advocates actually think and do.

The real people who advocate capitalism do not generally do so out of a belief that profit and the accumulation of wealth are the highest metaphysical and moral values in the universe, but rather out of the much more innocent conviction that generally the best person to decide what to do with resources is the person who created them.

Capitalism, like democracy, is a compromise resulting from our confused and fallen state. We advocate democracy not because there is some inherent value in a decision simply by virtue of a majority of voters approving it -- rather, history is full of wrongs which were lauded by the majority -- but rather because we lack the confidence that most people know what is really the best thing to do in any given situation. Democracy thus has the virtue of providing people with the government they deserve.

If the right thing to do in every situation was obvious and well known, then surely we would do well to support some more efficient form of government, perhaps an oligarchy or benevolent dictatorship.

As with power, so with money. I, for one, have a great skepticism that oligarchs or central planners really know where it would be best for all of society's resources to be allocated, and so it seems to me best that each person in society control the fruits of his labor, and allocate them as he sees best. At least that way we may hope that many people manage to do what is right, and if they fail to, they shall be getting the economy and society they deserve.